BDO Unibank Issuer Summary

Report date: 2026-05-13
Issuer: BDO Unibank, Inc.
Sector: Philippines banking
Primary credit focus: issuer credit, foreign-currency and peso-denominated senior bonds, deposit-led funding, capital and liquidity, linkage with the Philippine sovereign

1. Business Snapshot and Recent Developments

BDO Unibank is the largest private universal bank in the Philippines. It is a diversified banking group with broad businesses across corporate and retail lending, deposits, foreign exchange, payments, credit cards, trust, investment banking, private banking, leasing and finance, life insurance, non-life insurance brokerage, securities, and remittances. From a credit perspective, it should not be viewed as a “single-product retail bank,” but as a Philippine bank with the country’s largest domestic deposit and lending franchise. In its 2025 annual report, BDO states that, as of December 31, 2025, it was the largest bank in the country in terms of total assets, customer loans, deposits, trust assets, capital, and domestic branch and ATM network. BSP bank-level statistics also show that, within the Universal and Commercial Bank Group as of end-December 2025, BDO ranked first with total assets of PHP5.27tn and first with total loans and receivables, net, of PHP3.51tn.

The first point to note in assessing the bank’s credit is that its main credit support lies in the country’s largest customer access network and deposit base. At end-2025, consolidated total resources were PHP5.43tn, gross customer loans were PHP3.65tn, deposits were PHP4.19tn, and equity was PHP644bn. It had 1,996 branches and business offices, 7,716 teller machines, and PHP2.6tn in trust assets. Its scale itself supports funding stickiness, customer diversification, fee income, and capital markets access. BDO is a private-sector bank related to the SM Group, centered on SM Investments Corporation, but it is not a government-owned bank. Therefore, any discussion of government support or sovereign linkage should distinguish between explicit guarantees and the support assumptions seen by rating agencies based on BDO’s systemic importance as one of the largest banks in the Philippines.

Recent developments from 2025 through 1Q 2026 look quite positive on the surface. Full-year 2025 net income was PHP87.2bn, up 6% year on year, and ROCE was 14.4%. Net interest income rose 9%, gross customer loans rose 13%, deposits rose 10%, and the CASA ratio was 68%. The NPL ratio fell from 1.83% at end-2024 to 1.68% at end-2025, and NPL coverage was 133%. The CET1 ratio was 13.8%, and the total capital adequacy ratio was 14.9%. In 1Q 2026, the company release reported net income of PHP20.1bn, up 2% year on year; gross customer loans rose 16% to PHP3.8tn; deposits rose 15%; the NPL ratio was 1.68%; NPL coverage was 132%; and the CET1 ratio was 13.3%. Consolidated net income under the SEC 17-Q was PHP20.2bn, and the PHP20.1bn figure in the company release should be treated as a rounded amount for net income attributable to the parent.

However, 1Q 2026 should not be read simply as a confirmation of earnings growth. Net interest income rose 11%, and loans grew at a double-digit pace, but net income increased by only 2%. The company explained that higher precautionary provisions in response to changes in geopolitical risks constrained earnings. The SEC 17-Q also shows that impairment losses on financial assets in 1Q 2026 were PHP6.07bn, a sharp increase from PHP2.86bn in the same period a year earlier. This should be read less as a simple slowdown in profitability and more as a phase in which the bank is front-loading provisions in response to rapid loan growth and external uncertainty. The credit question is whether this increase in provisioning will remain a one-off conservative response, or whether it is an early sign of higher credit costs following loan growth.

In one phrase, the latest indicators show that BDO is both a “strong bank” and a “bank that is running while absorbing growth through capital and provisions.” Deposits, branch network, customer base, and earnings power are clear strengths. At the same time, when loans are growing at a double-digit pace, the current NPL ratio alone is not enough to judge the credit cycle. In particular, consumer loans, mid-market corporates, provincial expansion, commercial real estate, related-party transactions, and large corporate concentrations remain areas to verify. Key financial figures are organized later in the financial profile section.

2. Industry Position and Franchise Strength

BDO’s most important credit strength is its scale and customer access within the Philippine domestic banking system. BSP statistics as of end-December 2025 show BDO with total assets of PHP5.27tn, far above the second-ranked Bank of the Philippine Islands at PHP3.63tn, the third-ranked Metropolitan Bank & Trust Company at PHP3.54tn, and the fourth-ranked Land Bank of the Philippines at PHP3.52tn. BDO also ranked first in net loans at PHP3.51tn, with a large gap over the second-ranked BPI at PHP2.52tn. In BDO’s own IR materials showing industry rankings as of 3Q 2025, it reported an asset share of 19%, customer loan share of 24%, deposit share of 20%, and AUM share of 37%, confirming that it sits at the core of the domestic banking system.

In bank credit, scale itself is not an unconditional positive. Larger banks are more broadly exposed to the overall economic credit cycle, household repayment capacity, large corporate liquidity, sovereign ratings, and regulatory policy. In BDO’s case, however, scale is strongly linked to funding stability. Deposits at end-2025 were PHP4.19tn, exceeding gross customer loans of PHP3.65tn. The SEC 17-Q as of end-March 2026 also showed deposits of PHP4.43tn and loans and other receivables, net, of PHP3.79tn, indicating that loan expansion is not dependent solely on market funding. A bank with a strong domestic deposit franchise is less likely to be forced into a sharp contraction of lending or asset sales even when market funding closes. This matters for holders of foreign-currency senior bonds as a measure of the liquidity resilience of the bank as a whole.

BDO’s branch and ATM network is important in the context of the Philippines’ geographic dispersion and financial inclusion. As of end-2025, BDO had 1,996 branches and business offices and 7,716 teller machines. The annual report explains that it opened 106 new branches and offices, many of them in provincial and rural areas. This is not merely a broad sales network; it supports deposit gathering, retail lending, cross-selling of insurance and investment products, and relationship-building with small and medium-sized enterprises. Its subsidiary BDO Network Bank provides access to provincial and underserved markets, had 637 branches at end-2025, and grew its loan portfolio by 20%. From a credit perspective, provincial expansion improves customer diversification, but the granularity of underwriting and collections becomes important.

The strength of the franchise is also visible in the breadth of revenue sources. BDO is centered on commercial banking but also has investment banking, private banking, leasing, insurance, trust, securities, and remittance businesses. Non-interest income in 2025 was PHP84.6bn, up 9% year on year, while non-interest income also rose 6% in 1Q 2026 and insurance business income rose 27%. However, insurance, securities, and investment banking are more exposed to market conditions and are not as stable as commercial banking deposits and loans. In terms of competition, BDO faces major banks such as BPI, Metrobank, and Land Bank, as well as digital banks and payments companies. BDO’s broad physical network is a strength, but it also entails fixed costs and investment burden, as shown by the rise in the 2025 cost-to-income ratio to 57.4%.

BDO’s relationship with the SM Group should be evaluated separately within the franchise assessment. SM Investments Corporation and other related entities are major shareholders of BDO, while the SM Group is one of the Philippines’ leading private conglomerates, spanning retail, malls, property, hotels, and financial services. This relationship can be positive in terms of brand, customer access, and deep access to the domestic economy. However, this report has not quantified the effect, and the relationship with the SM Group should not be treated as a legal recovery source or explicit support for bondholders. Conversely, in bank credit, related-party exposures, concentration toward large corporate groups, and linkage with the group’s property cycle must be monitored. Based only on the public materials reviewed in this report, the details of related-party credit exposures and specific collateral have not been sufficiently analyzed, and therefore this report does not make definitive claims about explicit support from, or risk transfer related to, the SM Group.

3. Segment Assessment

BDO’s business segments are structured around commercial banking as the overwhelming core, with insurance, private banking, investment banking, leasing and finance, and other businesses supplementing peripheral earnings. For bank credit, commercial banking is the most important segment, as most credit risk, deposits, liquidity, and capital consumption arise there. Insurance and trust/investment-related businesses support revenue diversification and customer retention, but their risk characteristics differ from those of lending.

The segment data for 1Q 2026 are as follows. The segment table in the SEC 17-Q includes internal transactions and pre-elimination figures, so the sum of segment net income differs from final consolidated net income.

Commercial banking is the segment that largely determines BDO’s credit. In 1Q 2026, the commercial banking segment generated total net revenues of PHP73.5bn, segment net income of PHP20.6bn, and segment assets of PHP5.59tn, accounting for most of the group’s scale and profit. Loan growth, deposit acquisition, NIM, credit costs, operating expenses, and regulatory capital arise in this segment. The depth of commercial banking earnings is precisely why BDO can maintain net income even after increasing precautionary provisions. However, because it contains multiple books with different credit cycles, including corporate, retail, SME, provincial, and commercial real estate exposures, the headline NPL ratio alone is not sufficient.

Insurance, investment banking, and private banking provide revenue diversification and depth in customer relationships. The insurance segment’s net income was PHP1.75bn in 1Q 2026, making it meaningful support for non-interest income. On the other hand, the earnings scale of investment banking and private banking is smaller than that of commercial banking and is not the center of asset risk. These businesses should be treated less as core pillars of bank credit and more as supporting lines for customer access, fees, and cross-selling.

Leasing and finance, together with BDO Network Bank’s provincial expansion, combine growth opportunities with credit risk. In 2025, BDO reported 11% growth in corporate loans, 14% growth in mid-market loans, 18% growth in consumer loans, and 20% growth in BDO Network Bank’s loan portfolio. Broad-based growth demonstrates the strength of the franchise, but credit costs usually emerge with a lag after growth. Therefore, while growth in non-interest income can be viewed positively, the substance of loan growth and the sustainability of provisioning should remain central to the analysis.

4. Financial Profile and Analysis

BDO’s financial profile simultaneously shows the strong earnings power of the largest domestic bank and the capital and provisioning consumption that comes with growth. Full-year 2025 performance was solid: net income reached a record level of PHP87.2bn, net interest income was PHP203.1bn, non-interest income was PHP84.6bn, and pre-tax, pre-provision profit was PHP122.6bn. The NPL ratio declined to 1.68%, the CET1 ratio was 13.8%, the LCR was 121.2%, and the NSFR was 118.2%, all above regulatory requirements. Taken alone, these figures indicate a high degree of resilience.

However, the direction of travel requires attention. ROCE fell from 15.1% in 2024 to 14.4% in 2025 and 12.8% in 1Q 2026. NIM declined from 4.4% in 2024 to 4.3% in 2025, and LCR fell from 132.1% to 121.2%. NPL coverage fell from 145.0% to 133.1%, while the CET1 ratio also declined from 14.1% to 13.8%, and further to 13.3% in 1Q 2026. These are not dangerous levels, but they show that safety buffers are gradually being used as loans and assets grow quickly.

The key full-year 2025 indicators show that BDO has strong profit generation and is growing both loans and deposits at the same time. This is a desirable profile for a bank. However, operating expenses rose 13%, outpacing revenue growth of 9%, and the cost-to-income ratio rose to 57.4%. Branch network expansion, digital investment, compliance, and headcount growth are necessary for the long-term franchise, but they pressure revenue efficiency. Pre-provision profit rose only 4%, meaning that when provisions increase materially, final earnings growth is more likely to be constrained.

The 1Q 2026 financials are an extension of the 2025 trend. In the SEC 17-Q, total resources as of end-March 2026 were PHP5.71tn, loans and other receivables, net, were PHP3.79tn, and deposits were PHP4.43tn, all higher than at end-2025. Net interest income increased from PHP47.8bn to PHP53.0bn year on year. Other operating income and insurance business income also increased, pre-tax income was PHP25.3bn, and consolidated net income under the SEC 17-Q was PHP20.2bn. The company release figure of PHP20.1bn should be treated as a rounded amount for net income attributable to the parent.

However, the most important 1Q 2026 figure is the increase in impairment on financial assets from PHP2.86bn a year earlier to PHP6.07bn. The company describes this as higher precautionary provisioning in light of geopolitical risks, but this report treats that explanation as a hypothesis at this stage. Because net interest income rose 11% to PHP53.0bn and the commercial banking segment has deep earnings, BDO was able to absorb the increase in provisions and maintain profit of around PHP20.1bn to PHP20.2bn. However, if actual delinquencies or watchlist loans rise later amid rapid loan growth, the current 1.68% NPL ratio and 132% NPL coverage could become lagging indicators. The CET1 ratio also declined to 13.3% in 1Q 2026, so it will be necessary over the next few quarters to determine whether the increase in provisions is a one-off conservative response or an early sign of rising credit costs. From 2026 onward, the analysis should therefore track not only the NPL ratio, but also early delinquencies, restructurings, sector-by-sector lending, real estate-related exposures, consumer loans, credit cards, and credit costs for provincial and SME lending.

Asset quality currently appears good. The NPL ratio was 1.68% at end-2025 and remained 1.68% in 1Q 2026, low given BDO’s scale and loan growth. NPL coverage was also solid at 133% at end-2025 and 132% in 1Q 2026. However, the simultaneous decline in coverage and CET1 shows that the bank is growing while using safety buffers. When loans are growing at a double-digit pace, the denominator effect can make the NPL ratio appear stable. The absolute amount of delinquent and problem loans, the quality of provisions, and restructured loans should be assessed together.

Capital is sufficient to support the current rating level, but the cushion is not unlimited. The end-2025 CET1 ratio of 13.8% and total capital adequacy ratio of 14.9% were above the BSP minimum requirements. In BDO’s industry materials as of end-September 2025, consolidated CET1 was 14.43% and the total capital adequacy ratio was 15.55%, implying buffers of 3.93 points and 5.55 points, respectively, over regulatory minimums. Since ratios declined toward end-2025 and into 1Q 2026, future analysis should look at loan growth, RWA growth, dividends, provisions, FVOCI valuation gains and losses, and the capital burden of insurance subsidiaries together. In 1Q 2026, FVOCI bond valuation losses pressured comprehensive income, and interest-rate and market-price movements can affect the appearance of capital. However, this report has not sufficiently decomposed the extent to which RWA growth, dividends, FVOCI, and provisions each contributed to the CET1 decline.

The financial assessment is that, at present, BDO has clear elements supporting its credit strength. Profitability is good for an Asian bank, deposits and loans are both growing, the NPL ratio is low, and end-2025 capital and liquidity were above regulatory levels. For 1Q 2026, the decline in CET1 and the growth in deposits and loans can be confirmed, but LCR/NSFR had not been verified as of this report. However, the speed of growth, higher provisions, lower ROCE, lower CET1, and the decline in LCR/NSFR through end-2025 should not be dismissed. BDO is a strong bank, but its strength does not mean that problems will not arise; rather, it means that if problems emerge, they can be absorbed through earnings, deposits, and capital.

5. Structural Considerations for Bondholders

BDO bondholders are essentially taking the issuer credit of BDO Unibank, Inc. Its shares are listed on the Philippine Stock Exchange, and as of end-March 2026, it had 5.33bn common shares and 618mn preferred shares outstanding. In the shareholder structure, SM Investments Corporation owned 38.87% of common and preferred shares, Sybase Equity Investments Corporation owned 12.76%, and Multi-Realty Development Corporation owned 5.93%. This shows that BDO is a private-sector bank affiliated with the SM Group, but it does not mean that its bonds have an explicit parent guarantee.

The first structural issue for bondholders is the ranking of bank liabilities. BDO’s foreign-currency and peso-denominated senior bonds are typically unsecured senior obligations of the bank, and their outcomes depend on legal priority relative to deposits and other bank liabilities, the local resolution regime, governing law, issuing branch, tax provisions, and early redemption clauses. This issuer summary has not reviewed all individual offering documents. For investment in specific bonds, the relevant Offering Circular, pricing supplement, trust deed, governing law, negative pledge, cross default, tax gross-up, branch issuance, regulatory bail-in, and similar provisions must be checked.

The second issue is the relationship among bank creditors, shareholders, and the parent group. BDO has a relationship with the SM Group, but the bank’s capital and liquidity should be evaluated based on BDO’s own financials. The parent group’s broad business base can be positive in terms of brand, customer access, deposits, and corporate transactions. However, unless there is an explicit guarantee from the parent group, bondholders should not treat parent support as a principal source of repayment. Conversely, if related-party exposures or linkage with the property cycle are material, transparency and concentration risks should be discounted.

The third issue is the distinction between government support and explicit guarantees. In its April 2026 rating action, Fitch affirmed BDO’s Long-Term IDR at BBB- with a Stable Outlook and assigned both the Viability Rating and Government Support Rating at bbb-. Fitch stated that it expects extraordinary government support when needed given BDO’s high systemic importance, while also explaining that the IDR is driven by the VR. This means that BDO’s issuer credit benefits from domestic systemic importance, but individual bonds do not become government-guaranteed securities. Any deterioration in the Philippine sovereign’s credit strength or outlook could affect both the assessment of support capacity and foreign-currency debt.

The fourth issue is the difference between foreign-currency senior bonds and peso bonds. BDO has a USD5.0bn MTN Program and issued USD500mn of five-year fixed-rate senior notes in 2025. Its Capital & Funding page states that these notes mature in December 2030. This demonstrates access to international capital markets, but holders of foreign-currency bonds are also exposed to the Philippine sovereign, foreign-currency liquidity, issuing branch, governing law, and international investors’ risk appetite. Peso bonds are more closely linked to domestic deposits and liquidity, but depend on domestic interest rates, regulation, and the investor base.

The structural conclusion is that BDO senior bondholders are supported by the issuer credit of one of the country’s largest banks and deposit-led liquidity. At the same time, investors should not add a safety premium without confirming parent-group guarantees, government guarantees, or specific bond terms. For individual securities, it is necessary to distinguish issuer, issuing branch, ranking, governing law, the Philippine bank resolution regime, and the funding environment for foreign-currency and peso instruments.

6. Capital Structure, Liquidity and Funding

BDO’s funding is deposit-led, and this is the most important pillar of issuer credit. Deposits were PHP4.19tn at end-2025 and PHP4.43tn at end-March 2026, comfortably exceeding loans and other receivables, net. Looking at the composition of deposits, demand deposits were PHP651bn, savings deposits were PHP2.26tn, and time deposits were PHP1.52tn at end-March 2026. The CASA ratio was disclosed at 68% for full-year 2025, and the low-cost, sticky deposit base supports both NIM and liquidity.

The loan-to-deposit ratio at end-2025 was 87.2%. This indicates that loan growth slightly outpaced deposit growth, but the level is not yet excessive. A rough calculation as of end-March 2026 also shows loans and other receivables, net, of PHP3.79tn against deposits of PHP4.43tn, indicating that deposits can sufficiently support loans. The issue is direction rather than level. Loans rose 13% in 2025 and 16% in 1Q 2026, while deposits also rose 10% in 2025 and 15% in 1Q 2026. As long as deposit growth keeps pace with loan growth, funding risk should remain contained. If loan growth runs ahead and deposit growth slows, dependence on market funding and lower liquidity buffers would become credit constraints.

Liquidity ratios were above regulatory levels at end-2025, but the decline in buffers should be monitored. The consolidated LCR was 121.2% and the NSFR was 118.2% at end-2025, above the regulatory minimum of 100%. At end-2024, the LCR was 132.1% and the NSFR was 122.1%, so the direction has been downward. For 1Q 2026, deposits of PHP4.43tn and loans and other receivables, net, of PHP3.79tn do not show a major deterioration in the funding structure, but LCR/NSFR for the quarter had not been confirmed as of this report. For a bank such as BDO with a large deposit base, LCR/NSFR slightly above 100% does not immediately imply a problem. However, the appearance of liquidity headroom can change if rapid loan growth, increased market funding, foreign-currency bond issuance, and securities valuation losses from interest-rate movements overlap.

Market funding is a supplement to deposits and also a stress test of credit quality. BDO’s Capital & Funding page shows a USD5.0bn MTN Program, a PHP500bn Peso Bond Program, USD500mn of five-year fixed-rate notes issued in 2025, a PHP115bn ASEAN Sustainability Bond issued in 2025, and a PHP100bn ASEAN Sustainability Bond issued in 2026. Access to the international dollar bond market is positive in terms of foreign-currency funding diversification and investor recognition. However, unlike domestic deposits, foreign-currency bonds are affected by global interest rates, dollar liquidity, investors’ emerging-market risk appetite, and the Philippine sovereign’s foreign-currency rating. BDO’s basic strength lies in deposits, not market funding, and foreign-currency bonds should be viewed as a supplement for funding tenor and currency diversification.

The main capital-market funding programs and recent issuance are as follows.

Capital is sufficient at present, but the balance with growth is important. At end-2025, the CET1 ratio was 13.8%, the Tier 1 ratio was 13.9%, the total capital adequacy ratio was 14.9%, and the Basel III leverage ratio was 10.2%. The company release for 1Q 2026 stated a CET1 ratio of 13.3%. There is headroom over minimum regulatory levels for a bank, but given that Fitch cites sustained CET1 above 16% as one factor for an upgrade, BDO’s current capital level is not “very strong.” It is more naturally viewed as “sufficient for the country’s largest domestic bank as it continues to grow, but with room for improvement.”

The balance between dividends and growth also requires attention. The 2025 common-share cash dividend was PHP4.30 per share, and the payout ratio was 27.9%. Most earnings are retained internally, supporting loan growth and capital accumulation. If the payout ratio rises materially or large-scale shareholder returns are undertaken, the capacity to absorb loan growth and higher provisions at the same time would decline. At present, dividends are not excessive, but given the bank’s growth pace, maintaining internal capital generation is important.

In summary, BDO is the largest domestic bank funded primarily by deposits, and its end-2025 LCR/NSFR were above regulatory levels. For 1Q 2026, no major liquidity deterioration is visible from deposits and the loan-to-deposit ratio, but LCR/NSFR are unconfirmed. It also has access to foreign-currency and peso bond markets, and short-term liquidity concerns are limited. At the same time, loan growth is rapid and capital ratios and liquidity ratios through end-2025 have been declining, so future analysis should look at deposit growth, the loan-to-deposit ratio, LCR, NSFR, the market funding ratio, CET1, and credit costs together.

7. Rating Agency View

BDO’s ratings position it as a lower-investment-grade Philippine bank. In April 2026, Fitch affirmed BDO’s Long-Term Foreign- and Local-Currency IDR at BBB- with a Stable Outlook and assigned both the Viability Rating and Government Support Rating at bbb-. Fitch explained that BDO’s IDR is driven by its VR, which reflects its leading domestic franchise, strong domestic funding base, business growth, consistent profitability, and stable financial performance through economic cycles. Fitch also noted the change in the Philippine sovereign outlook from Stable to Negative on April 20, 2026, as a near-term macro headwind.

The important point in Fitch’s view is that government support is treated not as an “explicit guarantee” but as a “support likelihood based on systemic importance.” Fitch expects extraordinary government support if needed because BDO is the country’s largest bank and has high systemic importance, while the government’s capacity to support is affected by the sovereign outlook. In the Fitch information reviewed for this report, the VR and GSR were both bbb- and at the same level, and the IDR was described as VR-driven. Therefore, when reading BDO’s rating, it is necessary to distinguish between the bank’s standalone VR, government support likelihood, and the credit strength of the Philippine sovereign. The GSR should not be read as an additional government guarantee or recovery source.

Fitch cites as upgrade factors a sustained impaired-loan ratio below 1.5%, OP/RWA maintained at around 3.5%, and CET1 sustained above 16%. This means that, although BDO is currently a good bank, stronger asset quality, profitability, and capital headroom would be needed for an upgrade. BDO’s NPL ratio was 1.68% at end-2025, its CET1 ratio was 13.8%, and CET1 was 13.3% in 1Q 2026, leaving distance from Fitch’s upgrade thresholds.

Moody’s was reported in May 2025 to have affirmed the long- and short-term deposit ratings of BDO, BPI, and Metrobank at Baa2/P-2 with Stable outlooks. According to the report, Moody’s affirmed BDO’s Baa2 senior unsecured rating, (P)Baa2 MTN program rating, baa2 BCA, and adjusted BCA, citing stable asset quality, strong underwriting, solid funding and liquidity, good profitability, and adequate capital. Moody’s also viewed as strengths BDO’s reliance on market funds of only 6% of tangible banking assets and its end-2024 LCR of 132%. This report has not reviewed the full primary Moody’s release, so the detailed Moody’s wording should be treated as based on a secondary source.

This report has not confirmed S&P’s latest issuer rating from a primary source as of the report date. Therefore, S&P ratings are not used as a basis for the credit view in this report. For individual investment decisions, it is necessary to check the existence of S&P ratings, the rated entity, issuer, branch, and bond ranking, in addition to Moody’s and Fitch.

Taken together, the rating agencies view BDO as an investment-grade bank supported by one of the country’s largest domestic franchises, deposits, profitability, and asset quality. At the same time, linkage with the Philippine sovereign, CET1 falling short of upgrade thresholds, the NPL ratio not being sustainably below 1.5%, and rapid loan growth are constraints. Ratings are not a substitute for credit judgment, but they are consistent with this report’s framework: BDO is a strong domestic bank, while also facing sovereign constraints and a ceiling on capital headroom.

8. Credit Positioning

When comparing BDO with peers, it is natural to place it among the top franchises in the Philippine domestic banking sector. It ranks at or near the top in total assets, loans, deposits, AUM, capital, and branch network, and has a large scale advantage over BPI, Metrobank, and Land Bank. This supports deposit gathering, access to corporate and retail customers, capital markets access, fee income, and resilience through the credit cycle.

However, when international investors view BDO through foreign-currency senior bonds, it is different from global major banks or Singapore’s three large banks. Singapore banks such as OCBC, DBS, and UOB have higher sovereign ratings, the institutional framework of an international financial center, capital markets access, and foreign-currency liquidity. BDO, by contrast, is more closely tied to the Philippine economy and sovereign credit strength. Therefore, BDO’s foreign-currency senior bonds should be seen as instruments that provide exposure to the strong domestic franchise of the largest Philippine bank, while also accepting Philippine sovereign and emerging-market bank risk.

Within the Philippine banking sector, BDO is strong in scale, deposits, and revenue diversification. According to Moody’s-related media reporting, BDO, BPI, and Metrobank were all affirmed with Baa2/P-2 deposit ratings, meaning the major domestic private banks are aligned at levels close to the sovereign. Differentiation comes from each bank’s asset growth, consumer-loan mix, capital headroom, reliance on market funding, liquidity, and profitability. BDO has the largest deposits and loans, but its loan growth is rapid and its CET1 ratio had declined to 13.3% by 1Q 2026, so it cannot be said to be clearly superior to peers based on capital headroom alone.

As a senior bond credit, BDO is a lower-investment-grade Philippine bank senior credit. The premium investors should require should be higher than for top-tier Singapore or Korean banks. Relative to banks in the same country or the same rating category in emerging markets, valuation depends on how investors assess the strength of its deposit franchise and scale. This report has not reviewed live spreads, yields, CDS, or same-tenor comparisons, so it does not make a specific relative-value judgment.

The important point is not to simplify BDO either as a “sovereign-equivalent safe asset” or as “fragile because it is an emerging-market private bank.” As the largest domestic deposit bank, its solvency and liquidity are strong. However, in foreign-currency bond investment, the Philippine sovereign, bank regulation, foreign-currency liquidity, international investor risk appetite, and specific bond terms all matter. A credit comparison should align the deposit base, NPLs, CET1, LCR/NSFR, loan growth, provisions, and rating-agency support assumptions.

9. Key Credit Strengths and Constraints

BDO’s credit strengths are clear. The first strength is the largest deposit and lending franchise in the Philippines. It ranks at or near the top in total assets, loans, deposits, AUM, capital, and branch network, and sits at the core of the domestic banking system. This supports deposit funding, customer diversification, fee income, capital markets access, and its importance to regulators.

The second strength is profitability. Net income in 2025 was PHP87.2bn, ROA was 1.7%, and ROCE was 14.4%, indicating sufficient internal capital generation for a bank. In 1Q 2026, even after a significant increase in provisions, BDO maintained net income of PHP20.1bn. A bank with deep earnings has room to absorb higher credit costs before they directly affect capital.

The third strength is headline asset quality. The NPL ratio was 1.68% at both end-2025 and in 1Q 2026, and NPL coverage remained in the 130% range. The fact that the NPL ratio has not increased despite double-digit loan growth indicates that, at present, underwriting has not deteriorated significantly.

The fourth strength is deposit-led liquidity. The end-2025 LCR was 121.2% and the NSFR was 118.2%, both above regulatory levels. Deposits at end-March 2026 were PHP4.43tn, exceeding loans and other receivables, net, of PHP3.79tn. Market access for foreign-currency and peso bonds can also be confirmed, but the core of credit strength is deposits, not market funding.

The constraints are also clear. The first constraint is the speed of loan growth. Gross customer loans rose 13% in 2025 and 16% in 1Q 2026, supporting earnings in the short term, but credit costs emerge with a lag. Even if the NPL ratio is stable, delinquencies may rise as the vintage of new loans matures. Expansion in consumer loans, credit cards, SMEs, and provincial and underserved markets is particularly sensitive to credit costs in a downturn.

The second constraint is that capital and liquidity buffers are declining. The CET1 ratio fell from 14.1% at end-2024 to 13.8% at end-2025 and 13.3% in 1Q 2026. LCR also declined from 132.1% at end-2024 to 121.2% at end-2025. Both remain above regulatory levels, but direction matters when growth is rapid.

The third constraint is linkage with the Philippine sovereign. BDO is not a government-owned bank, but as one of the largest domestic banks, it is strongly affected by the country’s macro conditions, foreign-currency liquidity, regulation, sovereign ratings, and government support capacity. Fitch’s reference to the deterioration in the Philippine sovereign outlook in the context of BDO’s near-term macro environment cannot be ignored.

The fourth constraint is the granularity of information. Based only on the public materials reviewed in this report, sector-by-sector, collateral-by-collateral, real estate-related, related-party, and individual large-borrower exposures have not been sufficiently decomposed. The larger a domestic bank is, the broader its exposures to large corporates, commercial real estate, conglomerates, infrastructure, and consumer loans. Even when headline NPLs are good, the next source of credit costs can be misread unless the books driving growth are identified.

Combining strengths and constraints, BDO has investment-grade durability as an issuer credit, but it should be assessed cautiously as a bank in a growth phase. Deposits and earnings power are strong. The issue is how much loan growth can be supported, and for how long, by capital, liquidity, and provisions.

10. Downside Scenarios and Monitoring Triggers

BDO’s main downside scenario is less about sudden deposit outflows and more about a scenario in which credit costs rise after loan growth, pressuring capital and profitability at the same time. Because it has the country’s largest deposit franchise, ordinary funding stress is low. However, from 2025 to 1Q 2026, loans grew rapidly, CET1 declined, and provisions increased. This combination does not negate current credit strength, but it indicates the direction that should be monitored.

The first downside is a rise in credit costs for consumer and SME exposures. BDO grew consumer loans by 18% in 2025 and BDO Network Bank’s loan portfolio by 20%. Expansion into provincial and underserved markets broadens the customer base, but it is also sensitive to income shocks, interest rates, disasters, and weaker employment. If early delinquencies increase, credit costs can rise before headline NPLs.

The second downside is deterioration in corporate and real estate-related exposures. As the largest domestic bank, BDO is likely to have broad relationships with large corporates, infrastructure, real estate, commercial facilities, and domestic conglomerates. This report has not verified detailed balances for individual large borrowers or real estate-related exposures, so related-party exposures, collateral valuations, project finance, and large-name concentrations should be checked before individual investment.

The third downside is weaker pre-provision profit due to NIM compression and higher expenses. In 2025, net interest income increased, but NIM fell from 4.4% to 4.3%, operating expenses rose 13%, and pre-provision profit grew only 4%. If pre-provision profit growth is weak when credit costs rise, final profit and capital generation can be pressured at the same time.

The fourth downside is a decline in capital ratios. CET1 was 13.3% in 1Q 2026, above regulatory requirements, but it could decline further if loan growth, RWA growth, provisions, FVOCI valuation losses, dividends, and the capital burden of insurance subsidiaries overlap. Given that Fitch cites CET1 above 16% as an upgrade factor, BDO’s capital headroom is more a foundation for maintaining the current rating than a large source of rating upside. If CET1 approaches around 12%, or if the total capital adequacy ratio declines materially, the credit view should be reassessed.

The fifth downside is deterioration in the Philippine sovereign and the foreign-currency funding environment. BDO is strong in domestic deposits, but foreign-currency senior bond investors also take sovereign risk. If a weaker Philippine rating outlook, currency depreciation, risk aversion toward emerging markets, and higher US dollar rates coincide, foreign-currency bond spreads and refinancing costs would be prone to rise.

The main monitoring items are as follows.

The upside conditions are also clear. If the NPL ratio declines below 1.5%, credit costs stabilize, CET1 recovers from the 14% range toward the 15% range, LCR/NSFR remain stable at high levels, and loan growth stays within a range supported by deposits and capital, BDO’s credit assessment would strengthen. Conversely, if credit costs rise after loan growth, CET1 and liquidity decline, and the sovereign outlook also deteriorates, the risk premium on foreign-currency senior bonds would be prone to widen even with the strengths of the largest bank.

11. Credit View and Monitoring Focus

BDO’s current credit strength can be assessed as an investment-grade bank issuer credit supported by the largest deposit and lending franchise in the Philippines, good profitability, a low NPL ratio, and capital and liquidity above regulatory levels as of end-2025. The credit direction is broadly stable in the short term, but not yet clearly improving, given rapid loan growth, the increase in provisions in 1Q 2026, the decline in CET1, and the decline in LCR/NSFR through end-2025. LCR/NSFR for 1Q 2026 had not been confirmed, so the liquidity assessment for that quarter remains a provisional judgment based on deposit growth and the loan-to-deposit ratio. The probability of rapid credit deterioration is not high at present, given the deposit base, earnings power, and NPL coverage, but the view would need to be reassessed if credit costs, capital, and the sovereign outlook deteriorate at the same time.

The basis for this credit view is BDO’s overwhelming presence in the domestic banking system. It ranks first in BSP statistics for total assets and net loans, and its own disclosures describe it as the largest in deposits, loans, AUM, capital, and branch network. In bank credit, deposit stability is most important. BDO had PHP4.43tn of deposits at end-March 2026, supporting loans and other receivables, net, of PHP3.79tn. Because its domestic deposit franchise is strong, it is not a bank that would immediately face funding pressure if market funding conditions deteriorate.

At the same time, it would be risky to treat BDO as an unconditionally strong bank. Loan growth from 2025 to 1Q 2026 was rapid, the CET1 ratio declined from 13.8% to 13.3%, and end-2025 LCR/NSFR also fell from the prior year-end. The NPL ratio is stable at 1.68%, but NPL ratios are prone to lag during loan growth phases. Although the 1Q 2026 increase in provisions is described as precautionary, investors should verify over the next several quarters whether it is prudent front-loaded provisioning or an early sign of rising credit costs.

By security class, the starting point for senior bonds is BDO’s issuer credit. The main supports are the deposits, earnings power, capital, and liquidity of the country’s largest bank. However, assessment of individual securities does not end with issuer credit. For foreign-currency senior bonds, it is necessary to review the Philippine sovereign, foreign-currency liquidity, international investor risk appetite, issuing branch, governing law, individual terms, and treatment under resolution. Explicit guarantees from the parent group or government should not be assumed. The relationship with the SM Group can be positive for the franchise, but it has not been quantified and is not a legal recovery source for bondholders. Government support likelihood is also a rating consideration reflecting systemic importance, not a government guarantee.

This report’s central monitoring focus has three parts. First is the relationship between loan growth and credit costs. Even if the NPL ratio was stable in 1Q 2026, early delinquencies and watchlist loans in consumer loans, SMEs, provincial lending, corporates, and real estate-related exposures need to be checked. Second is the direction of capital and liquidity. CET1, total capital adequacy ratio, RWA, dividends, LCR, NSFR, and the loan-to-deposit ratio should be viewed together. Third is the sovereign and foreign-currency funding. Fitch’s negative change in the sovereign outlook does not immediately impair BDO’s senior credit, but it does affect the premium required by foreign-currency bond investors.

The credit view would improve if the quality of loan growth is confirmed, the NPL ratio declines further, provisions peak out, CET1 turns upward again, and LCR/NSFR are maintained. As Fitch indicates, if the NPL ratio is sustained below 1.5%, profitability strengthens, and CET1 approaches 16%, BDO’s credit headroom would widen. Conversely, if the 1Q 2026 increase in provisions is not temporary, credit costs continue to rise, CET1 declines further, deposit growth slows, and the sovereign outlook worsens, the current stable view would weaken.

The practical conclusion at this stage is that BDO’s senior issuer credit is a lower-investment-grade bank credit supported by one of the strongest franchises among Philippine banks and is within the scope of credit consideration. However, a specific securities investment decision requires confirmation of live spreads, relative value, issuing branch, governing law, individual bond terms, and treatment under resolution. From a credit perspective, BDO is not a weak bank to avoid. However, being the largest bank does not make it independent of the sovereign or the credit cycle. Investors should value the deposit base and earnings power while continuously monitoring growth quality, provisions, CET1, liquidity, and sovereign linkage.

12. Short Summary & Conclusion

BDO Unibank is a private universal bank with the largest deposit and lending franchise in the Philippines, and its issuer credit is supported by a strong deposit base, earnings power, and low NPL ratio. At the same time, loan growth from 2025 to 1Q 2026 has been rapid, and higher provisions, lower CET1, and declining liquidity ratios through end-2025 mean it is too early to conclude that the credit is on a clear improvement path. LCR/NSFR for 1Q 2026 are unconfirmed, so the liquidity assessment for that quarter remains a provisional judgment based on deposit growth and the loan-to-deposit ratio. Senior credit is within the scope of analysis as an investment-grade bank credit, but for foreign-currency bond investment, investors must continue to verify the Philippine sovereign, individual bond terms, issuing branch, treatment under resolution, quality of loan growth, and capital and liquidity buffers.

13. Sources

Company and primary sources

• BDO 2025 Annual Report
  https://www.bdo.com.ph/content/dam/bdounibank/en-ph/about-bdo/investor-relations/financials/pdf/quarterly-reports/2025/bdo-unibank-2025-annual-report.pdf
• BDO 2025 Annual Report Financial Supplements
  https://www.bdo.com.ph/content/dam/bdounibank/en-ph/about-bdo/investor-relations/financials/pdf/quarterly-reports/2025/bdo-unibank-2025-annual-report-financial-supplements.pdf
• BDO SEC Form 17-Q as of March 31, 2026
  https://www.bdo.com.ph/content/dam/bdounibank/en-ph/about-bdo/disclosures/sec-17-q/2026/sec-17q-as-of-mar312026.pdf
• BDO official release, "BDO delivers PHP20.1 billion net income in Q1 2026", April 24, 2026
  https://www.bdo.com.ph/about-bdo/learn/news-and-features/bdo-net-income-q1-2026
• BDO official release, "BDO recorded PHP87.2 billion net income in 2025", February 27, 2026
  https://www.bdo.com.ph/about-bdo/learn/news-and-features/bdo-net-income-full-year-2025
• BDO Investor Relations - Financials
  https://www.bdo.com.ph/about-bdo/investor-relations/financials
• BDO Investor Relations - Presentations & Events, including Industry Ranking 2025
  https://www.bdo.com.ph/about-bdo/investor-relations/presentations-and-events
• BDO Investor Relations - Capital & Funding
  https://www.bdo.com.ph/about-bdo/investor-relations/capital-and-funding
• BDO Shareholder Structure, as of March 31, 2026
  https://www.bdo.com.ph/about-bdo/corporate-profile/shareholder-structure
• Bangko Sentral ng Pilipinas, Ranking as to Total Assets, Universal and Commercial Bank Group, as of December 31, 2025
  https://www.bsp.gov.ph/Statistics/Financial%20Statements/Commercial/assets.aspx
• Bangko Sentral ng Pilipinas, Ranking as to Total Loans and Receivables, Net, Universal and Commercial Bank Group, as of December 31, 2025
  https://www.bsp.gov.ph/Statistics/Financial%20Statements/Commercial/loans.aspx
• Bangko Sentral ng Pilipinas, Published Balance Sheet for BDO Unibank Inc., as of December 31, 2025
  https://www.bsp.gov.ph/Statistics/Financial%20Statements/Commercial/BDO%20UNIBANK%20INC.aspx

Rating and market sources

• Fitch Ratings affirmation of BDO Unibank at BBB-/Stable, April 28, 2026, via MarketScreener/Acquiremedia republication
  https://www.marketscreener.com/news/fitch-affirms-the-philippines-bdo-unibank-at-bbb-outlook-stable-ce7f59ddd08ffe2d
• BusinessWorld, Moody's affirmation of BDO, Metrobank and BPI ratings, May 28, 2025
  https://www.bworldonline.com/banking-finance/2025/05/28/675285/moodys-affirms-ratings-of-bdo-metrobank-bpi/
• BusinessWorld, BDO USD500mn senior notes issuance, November 27, 2025
  https://www.bworldonline.com/banking-finance/2025/11/27/714786/bdo-raises-500m-from-dollar-bonds/

Internal working materials referenced

• Internal writing plan and source extraction notes were used for drafting discipline. They are not public source documents.

Unverified or pending items

• The 1Q 2026 Basel III LCR / NSFR disclosure has not been verified, and this report mainly discusses LCR/NSFR as of end-2025.
• The latest S&P issuer rating for BDO has not been confirmed from a primary source.
• Moody's May 2025 rating affirmation is based on media reporting, and the full primary release has not been verified.
• The Offering Circulars, pricing supplements, governing laws, tax provisions, early redemption clauses, cross-default provisions, bail-in or similar provisions, and other terms for all individual foreign-currency and peso-denominated bonds have not been fully reviewed.
• Sector-by-sector, collateral-by-collateral, real estate-related, related-party, and individual large-borrower exposure details had not been sufficiently decomposed as of this report.
• Live spreads, yields, CDS, and same-tenor comparisons for BDO senior bonds, peso bonds, and similarly rated bank bonds have not been reviewed. Therefore, this report does not make a specific relative-value judgment.