Issuer Credit Research

BDO Unibank Additional Discussion Report: Growth Quality and Risk Triggers

Report date: 2026-05-31
Issuer / Theme: BDO Unibank / loan growth quality, credit cost, liquidity, macro transmission, capital discipline and SM Group-related risk
Report type: additional_discussion
Discussion scope: SSC discussion dated 2026-05-30 covering five PM questions and follow-up questions on BDO's credit monitoring triggers
Reference context: 2026-05-13 issuer summary, read-only issuer notes, read-only knowledge snapshot, read-only source registry, and the discussion

1. Purpose and Treatment

This report is a supplementary report that organises the discussion points on BDO Unibank addressed in the discussion on 2026-05-30, taking into account the existing 2026-05-13 issuer_summary. The discussion below distinguishes between claims made in the discussion, context already confirmed in the existing report, and unverified items that should be checked going forward. It does not provide assurance on new facts, nor does it update the existing issuer_summary, issuer_notes, knowledge_snapshot, or source_registry.

The central view in the existing issuer_summary is to treat BDO as a low-investment-grade bank issuer with the largest deposit and lending franchise in the Philippines, while continuing to monitor its rapid loan growth from 2025 through 1Q 2026, higher provisioning, decline in CET1, lower liquidity ratios, and linkage to the Philippine sovereign and the foreign-currency funding environment. The current discussion does not change that view. Rather, it disaggregates which combinations of indicators should lead to a revision of the view.

2. Discussion Takeaway

The overall read-through from the discussion was that BDO's near-term risk should be viewed less as a sudden liquidity squeeze and more as a scenario in which credit costs, funding costs, and capital consumption gradually accumulate after a period of rapid loan growth. The key issue is not a single NPL ratio, a single LCR figure, or a single sovereign spread, but whether multiple indicators deteriorate at the same time.

The main hypothesis from the Q&A was that the first areas where deterioration would be most visible are credit cards and unsecured consumer loans. The existing report had already noted that BDO's loans grew rapidly in 1Q 2026, impairment increased, and CET1 declined to 13.3%, while the NPL ratio remained at 1.68% and NPL coverage at 132%. The discussion further concluded that card write-offs, consumer-loan Stage 2 balances, impairment expense/PPOP, NPL coverage, and CET1 should be assessed in combination.

On liquidity, BDO's deposit franchise remains the core of its credit strength. However, if loan growth persistently exceeds deposit growth, the CASA ratio declines, and the marginal cost of market funding and foreign-currency funding rises, the view that the bank can absorb these pressures through its strong deposit base would need to be weakened. For foreign-currency bond investors, aggregate LCR/NSFR alone is insufficient; foreign-currency deposits, foreign-currency HQLA, foreign-currency bills payable, and the terms of new issuance and refinancing of USD bonds need to be assessed separately.

On the macro and sovereign side, BDO has a strong standalone franchise, but as one of the largest banks in the Philippines, it has beta to the sovereign, the peso, domestic rates, consumer credit, and the property cycle. A widening of Philippine sovereign USD bond spreads or BDO USD bond spreads alone may still be treated as market beta. However, if this coincides with higher Stage 2 balances, higher impairment/PPOP, lower NPL coverage, and lower CET1, BDO would enter a phase in which the risk should be reassessed as issuer-specific credit risk.

On management policy, the key issue is not simply whether CET1 falls below 13%, but the order in which BDO subsequently adjusts growth. The discussion concluded that the most likely first response would not be a dividend cut or capital raising, but underwriting adjustments for cards and unsecured consumer loans, normalisation of loan growth, and adjustment of the expansion pace at BDO Network Bank. If BDO continues double-digit loan growth, high growth in cards, consumer finance, and rural finance, and dividend increases even after CET1 declines, that should be treated as a signal of growth prioritisation.

SM Group-related risk is currently best viewed not as direct related-party loss risk, but as correlation risk to the property, retail, and consumption cycles. However, if lending terms to related parties, collateral valuation, related-party deposits, intra-group transactions, and the transparency of RPT disclosures deteriorate under stress, the issue should be treated not merely as correlation risk but as governance / related-party support risk.

3. Existing Context and Discussion Status

The context already confirmed in the existing issuer_summary is that BDO is the largest deposit and lending bank in the Philippines and, at end-2025, reported total customer loans of PHP3.65tn, deposits of PHP4.19tn, an NPL ratio of 1.68%, NPL coverage of 133%, a CET1 ratio of 13.8%, LCR of 121.2%, and NSFR of 118.2%. For 1Q 2026, based on the company release, loans were up 16% YoY, deposits were up 15%, the NPL ratio was 1.68%, NPL coverage was 132%, and the CET1 ratio was 13.3%.

The important additional perspective from the discussion was that, even when headline indicators remain sound, the NPL ratio can lag before the vintages of newly originated loans season. In particular, for cards, NPL balances may appear contained because of write-offs. Therefore, the discussion concluded that write-offs, Stage 3 migration, Stage 2 increases, and impairment expense should be analysed together, rather than relying on the card NPL ratio alone.

In addition, the discussion presented a confirmed result for 1Q 2026 LCR/NSFR of aggregate LCR at 126.15% and NSFR at 116.86%. However, this additional_discussion does not treat these figures as a permanent update to the existing issuer_summary. At the next issuer_summary update, the relevant primary sources should be rechecked and the 1Q 2026 liquidity assessment should be updated.

4. Q&A Content Review

4.1 Quality of Loan Growth and Consumer Credit Costs

The first PM question asked which loan segments are most likely to become the first credit deterioration triggers within BDO's double-digit loan growth. Candidate areas included consumer loans, credit cards, mid-market corporates, provincial and rural lending, commercial real estate, and large-ticket / related-party exposures including SM Group-related exposures. The purpose of the question was to identify, at an early stage when the headline NPL ratio remains low, where deterioration in loan growth quality would first feed through into delinquencies, higher provisioning, and capital consumption.

The response concluded that delinquencies and higher provisioning would most likely first appear in unsecured consumer loans, especially credit cards, followed by broader consumer loans, particularly loans linked to employment and income. Commercial real estate, mid-market corporates, and large corporates are larger in absolute amount, but credit deterioration tends to surface with somewhat more of a lag. Related-party exposures, including SM Group-related exposures, are difficult to identify as the first credit deterioration trigger based on the disclosed ratios and NPLs, but should be monitored separately as correlation, concentration, and governance risks.

As support for this response, the discussion highlighted the end-2025 loan mix of corporate loans at PHP2,728.7bn, consumer loans at PHP642.7bn, and credit cards at PHP283.3bn, with credit cards having grown the fastest, by around 32% versus end-2024. On a parent-bank basis, credit-card receivables of PHP283.3bn were associated with Stage 3 balances of PHP15.4bn, Stage 3 transfers during 2025 of PHP14.4bn, and write-offs of PHP12.8bn. The discussion emphasised that cards are unsecured and tend to translate directly into write-offs. Consumer loans were also identified as the next area likely to generate provisioning pressure after cards, given balances of PHP518.3bn and Stage 3 balances of PHP23.7bn.

At the same time, the response did not treat the increase in 1Q 2026 impairment on financial assets to PHP6.067bn, from PHP2.855bn a year earlier, as confirmation of credit deterioration. The company has described the provisions as precautionary, and it remains unconfirmed which segments drove the higher impairment: cards, consumer, corporate, property, or SME. For this reason, the discussion concluded that the stable NPL ratio of 1.68% should not be the sole basis for judgment, and that segment-level Stage 2/Stage 3 balances, write-offs, ECL, and delinquency buckets should be checked from subsequent quarters.

The follow-up to this question asked which combination of indicators should be used to judge whether deterioration in cards and unsecured consumer loans remains merely a rise in credit costs that can be absorbed through earnings, or whether it leads to lower CET1, lower NPL coverage, a weaker rating outlook, and wider foreign-currency bond spreads. The response stated that the analysis should focus not on the card NPL ratio alone, but on a chain comprising higher card write-offs, rising consumer-loan Stage 2 balances, Stage 3 migration, higher impairment expense/PPOP, lower NPL coverage, and lower CET1.

As specific caution lines, the discussion used full-year 2025 credit loss provisions at roughly 12% of PPOP as the normal absorption benchmark, and identified impairment expense/PPOP above 20-25% for several quarters, NPL coverage below 120%, and CET1 below 13% as watch lines. If impairment expense/PPOP moves toward above 30%, NPL coverage moves toward 100-110%, and CET1 declines to the low-12% area, the discussion concluded that spillover to the rating outlook and foreign-currency bond spreads should be watched closely.

The credit implication is that BDO's current position should not immediately be characterised as credit deterioration. Instead, the focus should be on whether write-offs, Stage 2, Stage 3, and impairment rise together after high growth in cards and consumer loans. Even if the headline NPL ratio remains stable, problem balances in cards can disappear through write-offs, while Stage 2 can move first in consumer loans. Therefore, the practical entry point for assessing the quality of BDO's loan growth is not total loan growth, but the early-deterioration indicators in cards and unsecured consumer loans.

4.2 Deposit Franchise, Aggregate Liquidity, and Foreign-Currency Liquidity

The second PM question asked at what point BDO's strong deposit franchise should be reassessed. The purpose of the question was to clarify how a situation in which loan growth exceeds deposit growth, the CASA ratio falls, deposit costs rise, reliance on foreign-currency deposits and foreign-currency bond markets increases, and LCR/NSFR decline would combine to become a funding and liquidity risk that should be watched at the portfolio level.

The response concluded that BDO's liquidity risk should currently be viewed not as a near-term funding crisis, but as a medium-term risk in which loan growth exceeds deposit growth, the share of low-cost deposits declines, LCR/NSFR headroom is eroded, and NIM and sensitivity to foreign-currency markets deteriorate. The existing issuer_summary also noted that LCR/NSFR had declined by end-2025 and that there were unverified elements in the 1Q 2026 liquidity assessment.

As an additional confirmation in the discussion, aggregate LCR for 1Q 2026 was shown at 126.15% and NSFR at 116.86%. Compared with end-2025 LCR of 121.15% and NSFR of 118.20%, LCR improved modestly, while NSFR declined slightly. This means liquidity cannot be described as deteriorating in a one-way manner. However, the 2025 combination of 13% loan growth, 10% deposit growth, 5% CASA growth, 35% growth in Bills Payable/Sub-Debt, LDR of 87.2%, and LCR of 121.2% was viewed as an early form of using liquidity headroom to support loan growth.

The caution lines identified were: loan growth persistently exceeding deposit growth by more than 5ppt; LDR rising above 90% and moving toward 95%; the CASA ratio falling below 65% and moving toward 60%; LCR falling below 115% and then moving below 110%; NSFR falling below 110% and moving toward 105%; Liquid Assets / Total Assets falling below 28% and moving toward 25%; and Bills Payable/Sub-Debt growing significantly faster than deposits. The discussion emphasised that what matters is not a stand-alone decline in LCR, but the simultaneous emergence of a higher LDR, lower CASA, higher market funding, and lower NIM.

The follow-up on this theme asked whether, for foreign-currency bond investors, the key issue is not aggregate liquidity but the stability of foreign-currency deposits, foreign-currency HQLA, maturity concentration in foreign-currency market funding, and foreign-currency funding costs during peso depreciation. The response stated that even if domestic peso deposits are stable, a scenario in which spread deterioration first appears in foreign-currency bond markets and foreign-currency market funding is realistic, but there is no evidence at present of an imminent foreign-currency liquidity crisis.

In the discussion, end-2025 foreign-currency resources were shown at PHP835.3bn and foreign-currency liabilities at PHP675.5bn, indicating that disclosed foreign-currency assets exceeded foreign-currency liabilities. In addition, FCDU foreign-currency liabilities are subject to a 100% asset-cover regulation, and in November 2025 BDO issued USD500mn of five-year senior notes at 4.375%, attracting approximately USD1.6bn of demand. This is a positive indication of maintained market access.

On the other hand, foreign-currency deposit liabilities increased by approximately 6%, from PHP474.4bn at end-2024 to PHP502.3bn at end-2025, while foreign-currency bills payable increased by approximately 26%, from PHP121.5bn to PHP153.2bn. Therefore, the issue to monitor is not so much a shortage of foreign-currency funds, but the extent to which access terms in foreign-currency markets are vulnerable to the sovereign, the exchange rate, US dollar rates, and overseas investors' risk tolerance.

The credit implication is that BDO's liquidity analysis should not stop at the statement that it is strong on a group-wide basis. The domestic deposit franchise remains a strength, but for foreign-currency bondholders, monitoring needs to increase if foreign-currency deposits do not grow, foreign-currency bills payable and senior notes increase, BDO USD bonds underperform the Philippine sovereign and peers, demand multiples for new issuance decline, and new issue premiums widen, even if aggregate LCR/NSFR remain above regulatory levels.

4.3 Transmission Path from Philippine Sovereign / Macro Deterioration

The third PM question examined how, despite BDO's strong standalone franchise, deterioration in the Philippine macro environment, the sovereign, the peso, interest rates, property, and household income / employment could feed through to BDO's rating, spreads, and capital flexibility. The purpose of the question was that BDO needs to be viewed not only as a standalone bank credit, but also as a proxy exposure to Philippine macro / sovereign risk.

The response stated that BDO is strong within the Philippine banking sector, but as one of the country's largest banks, it has a high degree of linkage to Philippine macro / sovereign risk. Looking only at issuer-specific indicators, BDO was not deteriorating rapidly as of 1Q 2026, with loans up 16%, deposits up 15%, an NPL ratio of 1.68%, NPL coverage of 132%, and a CET1 ratio of 13.3%. At the same time, the discussion noted that macro pressure from peso depreciation, high inflation, policy rates staying elevated, and Fitch's revision of the Philippine outlook to Negative could first affect foreign-currency bond markets and household / SME credit.

The assumed chain was that Philippine sovereign concerns / peso depreciation would first lead to wider foreign-currency bond spreads and higher foreign-currency funding costs. Thereafter, through prolonged inflation and high interest rates, household and SME repayment capacity would weaken, credit costs in consumer loans, cards, and SMEs would rise, and PPOP absorption capacity and the CET1 buffer would be eroded. Within this chain, foreign-currency bond spreads are the market indicator most likely to appear first, while NPLs and CET1 would appear with a lag in quarterly results.

The follow-up asked how to distinguish whether wider sovereign spreads and peso depreciation remain temporary market beta or become a concern over BDO-specific rating outlook, capital flexibility, and funding capacity. The response stated that wider sovereign USD bond / CDS spreads, peso depreciation, and EM bank bond selling should first be treated as market beta and do not by themselves constitute BDO-specific credit deterioration.

The stage at which BDO-specific credit risk should be reassessed would be when, in addition to weaker market indicators, Stage 2 balances in consumer loans, cards, and SMEs increase for two consecutive quarters, impairment expense/PPOP remains above 20-25% for several quarters, NPL coverage falls below 120%, CET1 falls below 13%, and LCR/NSFR move downward. At this stage, it would also be necessary to check whether BDO USD bonds underperform the Philippine sovereign and peers such as BPI.

The stronger caution stage was defined as a case where impairment expense/PPOP moves toward above 30%, NPL coverage moves toward 100-110%, CET1 falls to the low-12% area, deterioration in the Philippine sovereign outlook spreads to other rating agencies, and BDO USD bonds clearly underperform the sovereign and peers. In such a case, the discussion concluded that it would be time to consider lowering exposure limits, stopping additional purchases, and reducing risk.

The credit implication is that market prices should be separated from accounting and capital indicators. Even if BDO USD bond spreads widen, there is room to treat this as market beta if the movement is broadly in line with the Philippines as a whole or the EM bank sector. However, if this coincides with rising Stage 2 balances, higher impairment/PPOP, lower NPL coverage, and lower CET1, the assumption that BDO's strong standalone franchise can absorb the stress should be weakened.

4.4 Management Policy, Growth Priority, and Response to Lower CET1

The fourth PM question asked how much BDO's growth strategy affects its CET1 buffer and rating maintenance stance. The purpose of the question was that, when credit costs, liquidity, and macro-linked risks deteriorate, the ultimate determinants of downgrade risk and spread widening are the extent to which management is willing to restrain growth and protect capital and liquidity.

The response stated that, at present, BDO does not appear to be in a phase where it would materially halt growth to protect capital. Rather, it appears to be using its earnings capacity and deposit base to expand loans at around double-digit rates, including retail, cards, provincial and digital banking, and group financial services. The discussion highlighted that 2025 loan growth was 11% for corporate, 14% for middle market, 18% for consumer, 32% for credit cards, and 20% for BDO Network Bank's loan portfolio, indicating that growth has expanded into areas such as cards, consumer, and provincial / SME finance.

At the same time, because the CET1 ratio declined to 13.3% in 1Q 2026, if loan growth, credit costs, and lower liquidity buffers progress simultaneously, the growth strategy itself could become a risk to rating maintenance capacity. Public materials do not confirm what CET1 level management intends to maintain or what level it regards as the minimum capital threshold for rating maintenance. The existence of ICAAP and a capital management policy is confirmed, but no specific public trigger is known.

The follow-up asked how management would respond if CET1 fell below 13% and Stage 2 increases or higher credit costs were confirmed in cards, consumer loans, and BDO Network Bank. The response stated that the most probable first response would be underwriting adjustments in cards and unsecured consumer loans, rather than a dividend cut or major capital raising. The discussion used as support the point that the CEO was said to have referred to pressure in the consumer sector and adjustments to credit standards for certain consumer lending.

The expected order of response was: first, tightening underwriting for cards and unsecured consumer loans; second, normalising and selecting overall loan growth; third, adjusting the expansion pace at BDO Network Bank and in provincial / small-ticket finance; fourth, stopping dividend increases or restraining the payout ratio; fifth, restraining non-core investments, M&A, and subsidiary investments; and sixth, capital-like funding. Given that BDO had 2025 net income of PHP87.2bn and a payout ratio of 27.9%, internal capital generation remains available, so capital raising was viewed as closer to a last response.

The credit implication is that a CET1 ratio below 13% should not be treated as a stand-alone sale trigger. Actions that can be assessed positively include slowing growth in cards and unsecured consumer loans, disclosing or explaining underwriting adjustments, not forcing BDO Network Bank to maintain loan growth, bringing loan growth back within the scope of deposit growth and internal capital generation, stopping dividend increases, and explaining a CET1 recovery plan.

Conversely, if after CET1 falls below 13%, loan growth continues in the mid-teens, high growth continues in cards, consumer, and BDO Network Bank, no tightening of credit standards is visible despite rising Stage 2 balances and credit costs, and dividend increases continue even after NPL coverage falls below 120%, this should be treated as a signal that growth priority is outweighing the rating maintenance stance.

The fifth PM question asked whether large-ticket and related-party exposures including SM Group-related exposures, commercial real estate, retail and consumer-related companies, and relationships with intra-group financial services could amplify credit risk during a downturn in the Philippine economy or property market. The purpose of the question was to assess the possibility that the SM Group relationship, which in normal times is a strength in terms of franchise, brand, retail access, and deposit base, could be viewed by the market during stress as correlation risk to property, retail, consumption, and large corporate groups.

The response stated that related-party loans and DOSRI loans are low as a percentage of total loans and impaired exposures are limited, so there is weak evidence at present for treating SM Group-related / related-party risk as a direct source of loss. In the discussion, end-2025 DOSRI loans were stated at PHP17.5bn, or 0.48% of total loans, with non-performing DOSRI loans of PHP37mn. It was also noted that the terms of related-party loans are described as substantially the same as those for ordinary counterparties with comparable risk.

At the same time, BDO has meaningful exposure to the property, retail, and consumption cycles. In the discussion, end-2025 sectoral loans included PHP452.0bn to wholesale and retail trade, or 12.4%, and PHP438.6bn to real estate activities, or 12.0%. When cards, consumer loans, and provincial / small-ticket finance through BDO Network Bank are added, the market assessment could be affected under stress even if related-party NPLs remain low.

The follow-up asked how to distinguish the stage at which SM Group-related risk should be viewed as ordinary correlation risk to the property, retail, and consumption cycles from the stage at which it should be viewed as governance / related-party support risk. The response stated that, at present, it is appropriate to view the risk not as direct related-party loss risk but as correlation risk to the property, retail, and consumption cycles, while also recognising that the assessment would need to change under stress.

In the ordinary correlation-risk stage, related-party loans remain low, related-party NPLs are also low, DOSRI loans are well below regulatory limits, Stage 2/Stage 3 balances in property and retail lending do not deteriorate materially, and funding conditions for SM Group companies do not deteriorate significantly. At this stage, BDO's relationship with SM Group continues to retain an aspect of franchise strength.

At the stage where correlation risk becomes priced as a market premium, there would be earnings slowdown and wider bond spreads at SM Group companies, deterioration in mall rents, occupancy, and residential sales, slower retail sales, rising Stage 2 balances in BDO's property, retail, and consumer loans, higher card write-offs, large movements in related-party deposits, and underperformance of BDO USD bonds versus the sovereign and peers. At this stage, it would still not necessarily be a governance issue, but the relationship with SM Group would begin to be priced as correlation risk.

At the stage where the issue should be viewed as governance / related-party support risk, there would be an increase in the related-party loan ratio; higher undrawn lines, guarantees, and commitments; below-market interest rates, maturity extensions, insufficient collateral, or covenant relaxation relative to market terms; restructuring for related parties; less transparent collateral valuation; a sharp decrease in, or higher dependence on, related-party deposits; increased intra-group transactions; lower granularity in RPT disclosures; and insufficient explanation of exceptional transactions. At this stage, even if related-party NPLs remain low, the indicators should be treated as leading signs of future losses, capital consumption, and lower market confidence.

The credit implication is that comfort should not be taken solely from the related-party loan ratio or NPLs. Direct loss risk appears limited at present, but under stress the credit issue will not only be "how much BDO lends to SM Group". It will also be whether BDO's credit, collateral, deposit, and transaction terms are genuinely managed independently when SM Group comes under stress.

5. Monitoring / Next Check

The following are continuing follow-up items extracted from the discussion. None represents a final judgment; they should be treated as candidate topics to be checked in future research and report updates.

Follow-up item	Current status in this discussion	Practical trigger
Higher credit costs in credit cards and unsecured consumer loans	Discussion hypothesis. The increase in 1Q 2026 impairment was confirmed, but the segment-level breakdown remains unverified.	If higher card write-offs, successive increases in consumer-loan Stage 2 balances, impairment/PPOP above 20-25% for several quarters, NPL coverage below 120%, and CET1 below 13% appear simultaneously.
Imbalance between loan growth and deposit / liquidity buffers	Combination of confirmed facts and discussion hypothesis. The decline in 2025 LCR/NSFR has been confirmed, but whether this is a structural deterioration or a temporary expansion remains unverified.	If loan growth persistently exceeds deposit growth by more than 5ppt, and LDR above 90%, CASA below 65%, LCR below 115%, NSFR below 110%, and NIM compression appear at the same time.
Foreign-currency liquidity and access to foreign-currency bond markets	Combination of unverified items and discussion hypothesis. The Q&A confirmed that foreign-currency resources exceed liabilities, but foreign-currency LCR, foreign-currency HQLA, stability of foreign-currency deposits, and maturity concentration remain unverified.	If foreign-currency deposits fail to grow while foreign-currency bills payable / senior notes increase, BDO USD bonds underperform the Philippine sovereign and peers, and new issue demand multiples decline / new issue premiums widen.
Transmission of Philippine sovereign / macro deterioration into issuer-specific credit	Discussion hypothesis. Sovereign, peso, and rate factors could appear first as market beta, but transmission into issuer-specific credit deterioration remains unverified.	If BDO USD bonds underperform the sovereign and peers, and at the same time consumer / SME Stage 2 balances increase, impairment/PPOP exceeds 20-25%, CET1 falls below 13%, and NPL coverage falls below 120%.
Management response to lower CET1	Discussion hypothesis. There has been reference to consumer credit-standard adjustments, but explicit response rules for a CET1 decline below 13% remain unverified.	If double-digit loan growth, high growth in cards, consumer, and BDO Network Bank, dividend increases, and higher credit costs all continue after CET1 falls below 13%. If CET1 moves to the low-12% area and impairment/PPOP moves toward 30%, risk reduction should be considered.
Transformation of SM Group-related / related-party risk from correlation risk into governance risk	Combination of unverified items and discussion hypothesis. The Q&A confirmed that related-party loan ratios and NPLs are low, but actual exposures by SM Group company, collateral, guarantees, deposits, undrawn lines, and transaction terms remain unverified.	If spreads and earnings at SM Group companies deteriorate, related-party loans, guarantees, and undrawn lines increase, related-party deposits move sharply, restructuring / term changes appear, RPT disclosure explanations become insufficient, and Stage 2 balances in property / retail / consumer lending increase.

6. issuer_notes.md Transfer Candidates

The following are candidates that could be considered for addition to the "management strategy, investment plan, and financial policy follow-up" section of issuer_notes.md in future updates. They have not been transferred at this point. Unverified items should be treated as unverified.

Continue checking whether Stage 2 balances, write-offs, and impairment expense increase after high growth in cards and unsecured consumer loans. If higher credit costs erode PPOP absorption capacity and CET1, this would raise concerns over growth quality.
Reassess the view of the strong deposit franchise if loan growth exceeds deposit growth and CASA decline, higher market funding, and lower LCR/NSFR progress simultaneously.
Even if domestic liquidity remains strong, check foreign-currency deposits, foreign-currency HQLA, and USD bond refinancing terms separately. Watch for deterioration in foreign-currency market access if BDO USD bonds begin to underperform the sovereign and peers.
BDO has high Philippine macro / sovereign beta. Monitor separately the market beta caused by sovereign / peso factors and issuer-specific credit deterioration accompanied by higher Stage 2 balances, higher impairment/PPOP, and lower CET1.
If CET1 falls below 13%, check whether BDO protects capital through growth restraint, consumer-credit tightening, and dividend restraint. Continued high growth and dividend increases would be a growth-priority signal.
SM Group-related risk is a franchise strength in normal times, but under stress it could turn into correlation risk to property, retail, and consumption, or into issues around related-party support and RPT transparency. Continue monitoring.

7. Unverified / Pending Items

The main items that remain unverified in this additional_discussion are as follows. These were raised as issues in the discussion, but as of the preparation of this report, no new primary-source verification or permanent memo update has been conducted.

Segment-level breakdown of the increase in 1Q 2026 impairment. ECL, Stage 2, Stage 3, and write-offs by cards, consumer loans, corporate, property, SME, and BDO Network Bank remain unverified.
Credit-card revolver ratio, delinquency buckets, dependence on minimum repayment, and deterioration by income tier and region remain unverified.
Consumer-loan breakdown into salary loans, housing loans, auto loans, personal loans, and other categories, as well as Stage 2/Stage 3 migration, collateral, and recovery status, remain unverified.
Independent credit indicators, delinquencies, Stage 2/Stage 3, NPLs, and provisions for mid-market corporates, SMEs, provincial and rural areas, and BDO Network Bank remain unverified.
The 1Q 2026 LCR/NSFR figures presented in the discussion need to be rechecked against primary sources at the next issuer_summary update.
Foreign-currency LCR, foreign-currency NSFR, foreign-currency HQLA, stability of foreign-currency deposits, the maturity ladder for foreign-currency market funding, and the trend in foreign-currency bills payable / deposits remain unverified.
Z-spreads, ASW, CDS, and relative spreads for BDO USD bonds, Philippine USD sovereign bonds, and peer bank bonds remain unverified.
Management's response if CET1 falls below 13%, and internal rules on stopping dividend increases, restraining growth, and raising capital, remain unverified.
Actual exposures by SM Group company, related-party deposits, collateral / guarantees, undrawn lines, transaction terms, restructuring, and the granularity of RPT disclosures remain unverified.
Earnings, bond spreads, mall occupancy / rents, residential sales, retail sales, and short-term debt maturities at SM Investments, SM Prime, and other companies remain unverified.

8. Reference Context

For this additional_discussion, the existing 2026-05-13 issuer_summary, issuer_notes, knowledge_snapshot, and source_registry were read as contextual references. issuer_notes, knowledge_snapshot, and source_registry were not updated. The existing issuer_summary text, issuer_flash text, coverage_list, public site, and Git-managed files were also not updated.

The main external context referenced in the discussion included BDO's 2025 Annual Report, 2025 Financial Supplements, 1Q 2026 SEC Form 17-Q, 1Q 2026 / FY2025 official releases, BSP-related statistics, rating-agency and media-based rating comments, and BDO's Capital & Funding and Related Party Transaction disclosures. However, this report does not adopt these as newly verified facts; it organises them as the basis addressed in the discussion.