BPI Earnings Call: Record Profit Amid Rising Risks

Bank of the Philippine Islands ((BPHLF)) has held its Q4 earnings call. Read on for the main highlights of the call.

Bank of the Philippine Islands’ latest earnings call struck a broadly upbeat tone, underscoring record revenues, healthy loan growth, wider margins and strong capital, even as management acknowledged mounting asset-quality pressures. Executives framed 2025 as a year of strategic gains and scale, but flagged higher provisions, rising non-performing loans in key retail books and a less favorable trading backdrop as risks to watch in 2026.

Record Earnings Growth Despite Q4 Soft Patch

BPI posted a record FY2025 net income of PHP 66.62 billion, up 7.4% year on year, underscoring resilient core profitability. Q4 net income climbed 14.7% versus a year earlier to PHP 16.13 billion but slipped 8% sequentially as heavier provisioning and seasonal expenses weighed on the quarter’s bottom line.

Revenue Engine Driven by Net Interest Income

Total revenues rose 14.8% to PHP 195.28 billion, reflecting strong volume growth and firm pricing across the book. Net interest income hit an all-time high, expanding roughly 16% as loan growth of 14.7% and better asset yields more than offset rising funding costs.

Loans, Assets and Deposits Scale Up

The balance sheet expanded robustly, with gross loans up 14.7% year on year to PHP 2.62 trillion and total assets rising 10% to PHP 3.65 trillion. Deposits climbed 8.6% to PHP 2.84 trillion, pushing the loan-to-deposit ratio to a relatively high 92.4%, signaling active balance sheet deployment to support growth.

Margins Reach Multi-Year Highs

Annual net interest margin improved to 4.59%, 28 basis points higher than a year earlier, reflecting a richer loan mix and pricing discipline. Risk-adjusted NIM, which factors in credit costs, rose even more sharply to 3.97%, the best level in five years and a key driver of returns.

Wealth and Fee Businesses Hit New Peaks

Non-interest income also delivered, with fee income reaching a record PHP 38.96 billion, up 9.1% year on year as transaction and advisory activities scaled. Wealth management remained a bright spot, with AUM jumping 18.7% to PHP 1.91 trillion and the client base growing 26.3% to 1.46 million, delivering record net funds contribution.

Customer Base and Agency Network Rapidly Expand

BPI added around 2.2 million customers in 2025, bringing its total customer base to 18.2 million and reinforcing its retail franchise. The bank’s agency banking footprint also widened to about 7,000 partner stores across 32 partners, with a plan to have 2,000 transaction-capable outlets by 2026 to deepen reach.

Shift Toward Higher-Yielding Non-Institutional Loans

Management highlighted a strategic shift toward non-institutional lending, which now accounts for 30.5% of total loans versus 21.1% in 2021. These retail and SME exposures carry loan yields above 12% and an ROA around 4%, materially higher than the sub-3% returns seen in the institutional book, supported by a three-year CAGR near 29.5%.

Capital Strength and Rising Shareholder Returns

The bank’s capital position remained solid, with an indicative CET1 ratio of about 13.9% and a total capital adequacy ratio of 14.7%, supported by PHP 401 billion in CET1 capital. Shareholders benefited from a 10.1% increase in total cash dividends to PHP 4.36 per share, while ROE stood at 14.5% and ROA at 2%, underscoring healthy profitability.

Improving Cost Efficiency and OpEx Discipline

Operating expense growth moderated to 9.9% year on year as investments in technology, manpower and marketing were better paced. This helped the cost-to-income ratio improve to 47.2%, while technology spending growth decelerated to around 12% from previously higher levels, indicating greater cost discipline.

Digital, Branch Transformation and ESG Initiatives

BPI continued to scale its digital ecosystem, spanning the BPI app, VYBE, BizLink, BanKo, Wealth Online and Trade, alongside 131 API partners enabling embedded banking. Branches are being reshaped into advisory centers, with 54% of branch time now advisory-focused and average monthly net acquisition improving by 31.8%, while ESG efforts included an oversubscribed PHP 40 billion sustainability bond and more branches using renewable energy.

Provisions Surge as Risk Costs Normalize Upward

A sharp increase in provisions marked a key pivot, with total provisions jumping 168.9% to PHP 17.75 billion as the bank updated expected credit loss models and absorbed weaker macro inputs. Q4 saw a particularly large sequential spike in allowances, which materially dampened quarter-on-quarter earnings despite strong pre-provision operating trends.

Higher Credit Costs Set to Persist

Credit costs for 2025 ran at around 75 basis points, already above recent lows, and management now expects a further uptick to about 80 to 89 basis points in 2026. This guidance signals continued elevated provisioning pressure as the portfolio mix shifts and macro conditions remain uncertain, even as the bank remains committed to sustaining robust growth.

NPLs Rise, With Pressure in Retail Segments

Gross non-performing loans increased to PHP 56.9 billion, with the NPL ratio edging up 6 basis points year on year to 2.18%, though it improved 11 basis points versus the prior quarter. Stress was most evident in retail books, where credit card NPLs rose to 4.68%, personal loans to 7.16%, microfinance to 13.3% and SME NPLs to 7.25%, reflecting riskier segments and newer vintages.

Margin and Revenue Volatility at the Quarterly Level

On a quarterly basis, NIM dipped 4 basis points to 4.58% as institutional loan yields adjusted more quickly to policy rate moves than funding costs. Management expects NIM to stay broadly stable but cautioned that projected policy rate cuts could exert mild downward pressure, adding another source of earnings volatility.

Sequential Profit Decline Highlights Earnings Sensitivity

The 8% sequential decline in Q4 net income underscored how higher provisions and year-end expense spikes can impact quarterly results. While the structural earnings trajectory remains positive, investors will likely monitor intra-year swings as the bank balances growth ambitions with tighter risk management.

Funding Mix Shifts and CASA Pressure

Deposit growth was led by time deposits, resulting in pressure on the current and savings account mix and soft corporate CASA trends. If sustained, this tilt toward higher-cost funding could weigh on margins, prompting management to emphasize more selective funding strategies and continued diversification of funding sources.

Trading Gains Seen Normalizing in 2026

Trading income increased 21.3% to PHP 8.29 billion in 2025, helped by favorable interest rate moves following central bank cuts. Management does not expect these conditions to repeat, guiding to a lower trading contribution in 2026 as the scope for further rate-driven gains narrows.

Managing NPLs from Newer, Riskier Borrower Cohorts

The rise in NPLs was concentrated in younger, lower-income borrowers and vintages from 2022 to 2025, reflecting aggressive expansion and testing of new programs. In response, BPI is tightening credit score thresholds and strengthening collections, acknowledging that pursuing higher-yield growth inevitably brings episodic spikes in delinquencies.

Forward Guidance: Growth with Tighter Risk Controls

For 2026, BPI projects loan growth in the low teens, with institutional loans growing around 8–9% and faster 20–25% expansion in consumer and other non-institutional books, while credit costs are guided to about 80–89 basis points and NIMs broadly stable. Capital remains ample to support potential dividend uplift, operating expenses are budgeted to rise about 10% with a cost-to-income ratio near 47%, and management aims to deepen digital and agency banking while expecting lower trading income and maintaining a selective funding mix.

BPI’s earnings call painted a picture of a bank in strong operating shape, leveraging scale, digital capabilities and a richer loan mix to deliver record results and attractive returns. The main watchpoints are rising NPLs in retail segments, higher credit costs and funding-mix pressures, but management’s proactive stance and solid capital base suggest the franchise remains well placed for disciplined growth in 2026 and beyond.