BPI's Middle East Pivot: Higher Provisions, Tighter Credit, But Collateral-Backed Confidence

Q1 net income up 1.7% but provisions surge 83.3% as the bank pre-positions for consumer stress.

BPHLY · Earnings Call · 2026-04-22

A Quarter Clouded by Conflict

BPI's first-quarter results reflect a bank bracing for impact. Net income rose a modest 1.7% year-on-year to PHP 16.92 billion, but the quality of that growth is the story. Revenue climbed 13.9%, yet operating expenses jumped 15.8% and provisions surged 83.3% to PHP 5.5 billion. The culprit, as CEO TG Limcaoco put it, is the Middle East conflict that has begun to bite into the consumer and SME books. "It's about natural with this crisis with higher fuel costs, people are predicting the food costs may go up, we will see some stress." “We'll see some stress.” — Jose Teodoro Limcaoco, President and CEO · 2026-04-22 That stress is already visible in early delinquency buckets. The NPL ratio rose 24 basis points quarter-on-quarter to 2.42%, driven largely by institutional loans, but the forward-looking measures are more telling. The bank's ECL cover expanded to 103.5%, while point-in-time NPL coverage fell to 87.15%, supported by collateral strength. CFO Eric Luchangco explained that provisions were "reflecting normalization of credit costs and base effects." “Normalization of credit costs and base effects.” — Eric Roberto Luchangco, Chief Financial Officer · 2026-04-22 The bank is now guiding credit costs to the 90-100 bps range, up from the 80s it had previously projected.

We'll see some stress. And that's why we have provisioned a little more aggressively in the first quarter with our ECL covers higher. When really, a lot of the provision we did was not for the corporate because we didn't need because of the collateral but really for the consumer side.
Jose Teodoro Limcaoco, President and CEO · 2026-04-22

Institutional NPLs: A Few Bad Apples, Not a Rotten Barrel

The jump in institutional NPLs looks alarming at first glance — the segment's NPL ratio climbed 21 bps to 1.19% — but management insists it's concentrated. Six or seven accounts drove the PHP 3.4 billion net increase, with one fully secured account alone making up half. "The big one is just completely failed business... we're looking at taking the property and then just there are potential buyers for the property." “Potential buyers for the property.” — Jose Teodoro Limcaoco, President and CEO · 2026-04-22 The bank expects two accounts totaling PHP 3.3 billion to revert to performing status in Q2, which should bring coverage back to around 95%. This is a company-specific story, not a systemic signal, and it underscores the importance of Institutional Banking discipline.

Scaling Back, But Not Abandoning the Consumer

The bank has trimmed its loan growth outlook to 10-12% from the low-teens, citing the weaker economy. But it remains committed to the consumer book, where margins are wide enough to absorb higher losses. As TG noted, "if you look back at the last 4 years and look at our net interest income growth, our net interest income growth has surpassed or was about 9 to 10 percentage points faster than that of our competitor." “9 to 10 percentage points faster.” — Jose Teodoro Limcaoco, President and CEO · 2026-04-22 The bank is tightening credit standards and stepping up collections, but it won't retreat from a market it sees as structurally underpenetrated. The Loan growth slowdown is a deliberate choice in a higher-risk environment, not a loss of confidence. This contrasts with the prior quarter's guidance. In February, Eric had projected loan growth in the "low teens." “low teens.” — Eric Roberto Luchangco, Chief Financial Officer · 2026-02-11 and credit costs in the 80s. "So moving forward, credit cost, we estimate in the kind of 80-ish basis point range." “80-ish basis point range.” — Eric Roberto Luchangco, Chief Financial Officer · 2026-02-11 Now that's been revised. The NPL formation outlook has also shifted, and the bank is preparing for a tougher 2026.