BDO Leasing and Finance, Inc. (PSE: BLFI) posted PhP1.54 billion revenues in 1H 2019 compared with PhP1.58 billion a year-ago. Loans and receivables amounted to PhP28.7 billion, largely due to the sale of a portion of its lower-yielding portfolio earlier this year to mitigate the impact of compressed margins. These resulted as funding costs, which increased substantially with the rapid rise in interest rates last year, adjusted faster than asset yields. It should be noted that the company’s earning assets typically carry fixed interest rates for three (3) to five (5) years, which is customary for lease transactions, while funding is via short-term commercial papers and bank loans. As such, BDOLF registered a net loss of PhP28.8 million during the period.
This is seen as a temporary situation, as the sale of the company’s lower-yielding portfolio, combined with the application of prevailing interest rates to new loan bookings and the re-pricing of existing loans, is expected to result in a recovery in margins in the second half of 2019.