BDO Unibank poised for a capital-raising spree as loan growth flourishes

The government’s target of infrastructure spending is also up.

Expect the Southeast Asian country’s bank to go on a capital-raising spree next year with loan growth remaining robust and the government’s target of infrastructure spending at 5% of GDP from 2.6% last year, we believe BDO’s plan to raise capital is likely to materialize early next year.

According to a report by Maybank Kim Eng, BDO reiterated early this year it does not need to raise additional equity as it intended to manage its capital position by: (1) reinvesting earnings; (2) reviewing its dividend policy — stock vs cash; and (3) optimizing the capital positions of subsidiaries so they can upstream dividends.

“One example is by renouncing the special cash dividend of PHP0.90/sh paid the last couple of years. So far, BDO has only declared regular-quarterly cash dividend. Nevertheless, it has also indicated that better growth opportunities may trigger a change in capital-raising plans to support growth in risk assets,” Maybank Kim Eng said.

“Discussions with several banks also indicate the positive momentum is likely to continue to the end of the year, for mid-teen loan growth in 2016. We raise our BDO 2017F loan growth assumption to 15% from 13%. Extra USD1b equity is EPS-dilutive, lowers ROE BDO last raised USD1b in capital in Jun 2012,” Maybank Kim Eng added.