BDO Unibank Inc., the banking arm long central to the Sy family’s financial empire, entered 2026 with a familiar distinction: it remained a powerful dividend machine for SM Investments Corp. Yet beneath the comfort of record earnings and rising payouts, the country’s largest bank is showing signs that the next leg of dividend growth may be harder won.
BDO posted record net income of ₱87.2 billion in 2025, up 6% from the prior year, as its balance sheet continued to expand across loans, deposits and investment securities. Total resources climbed 11% to ₱5.4 trillion, loans rose 13% to ₱3.7 trillion, deposits increased 10% to ₱4.2 trillion, and equity advanced 12% to ₱644.1 billion. The bank also remained the Philippines’ largest lender by assets, loans, deposits and trust assets, with 1,994 domestic branches and 7,716 ATMs, CDMs and related machines as of end-2025.
For SM Investments, which holds 40.6% of BDO’s common shares, the bank remains a major source of recurring income. BDO is described in the annual report summary as SM Investments’ largest dividend contributor, a critical role for the Sy family’s listed holding company as it balances interests across banking, property and retail.
The good news for shareholders: BDO’s payout ratio remains modest, leaving room for further dividend increases. The bank raised its regular quarterly common cash dividend from ₱0.75 per share in 2023 to ₱1.00 in the second quarter of 2024, then to ₱1.10 from the second quarter of 2025 onward. For 2025, common dividends consisted of ₱1.00 per share in the first quarter and ₱1.10 per share in each of the second, third and fourth quarters, with preferred shares continuing to receive dividends at 6.5% per annum. BDO also distributed a ₱7.1 billion property dividend, equivalent to roughly 1% of shares, related to the TPCI merger.
That payout trajectory suggests confidence. With earnings per share of ₱16.28 and book value per share up 11% to ₱119.03, BDO appears to have the earnings base to support higher regular dividends over time. Its asset quality also improved, with the non-performing loan ratio declining to 1.68% from 1.83%, while NPL coverage stood at 133%.
But the same 2025 results that gave shareholders reason to cheer also contained a warning: BDO is growing, but its returns are softening.
The bank’s return on average equity fell to 14.32% from 15.00%, while return on average assets declined to 1.7% from 1.8%. Net interest margin slipped to 4.3% from 4.4%, and profit margin narrowed to 23.1% from 23.5%. These are not crisis numbers; they remain healthy for a dominant Philippine bank. But the direction matters, especially for a stock often valued on the durability of its compounding power.
The pressure is partly structural. BDO’s scale gives it reach, but it also requires capital, technology spending, branch investments, people, compliance systems and funding buffers. Operating expenses rose 13% to ₱165.1 billion in 2025, driven by employee benefits, IT, marketing and litigation-related costs. That expense growth outpaced the bank’s 6% net income growth, pointing to a less favorable cost-to-income dynamic.
Capital is another constraint. BDO’s capital-to-risk-assets ratio declined to 14.9% from 15.2%, while its CET1 ratio stood at 13.8%. Liquidity also eased, with the liquidity ratio falling to 30.1% from 31.7%. Again, the levels do not suggest immediate distress. But they show that faster loan growth and risk-weighted asset expansion are absorbing capital.
That creates the central tension for investors: BDO can probably afford higher dividends, but every peso paid out is a peso not retained for loan growth, regulatory capital or funding flexibility.
The bank’s funding actions in 2025 reinforce that point. BDO raised ₱115 billion through a Peso ASEAN Sustainability Bond in July 2025 and issued US$500 million in five-year senior notes in December 2025, proceeds intended to support lending, diversify funding, and finance sustainability-linked initiatives. Those capital market exercises underline the bank’s growth ambitions — but also the funding demands that come with them. [
For SM Investments, the math is attractive but nuanced. A higher BDO dividend would boost cash flow into the Sy family’s holding company, helping support its own dividends, investments, and balance sheet flexibility. But BDO’s long-term value to SMIC depends less on maximizing near-term payout and more on sustaining durable earnings growth. A bank that over-distributes during a period of rapid loan expansion could risk slower compounding, thinner buffers or reduced flexibility if credit conditions deteriorate.
That is why BDO’s modest payout ratio may be viewed less as stinginess and more as strategic restraint. The bank has been steadily increasing dividends, but it has not pushed the payout to levels that would compromise capital formation. In a banking system where scale, trust, and capital strength are competitive advantages, that discipline matters.
The bull case remains straightforward. BDO is the Philippines’ largest bank, has a nationwide network, continues to grow loans and deposits, benefits from the SM ecosystem, and still produces double-digit return on equity. If profitability stabilizes and asset quality remains sound, the dividend can keep rising gradually. Its 2025 performance showed the franchise remains powerful, with record earnings, improved NPLs and higher book value per share.
The bear case is subtler. Record profit did not prevent weaker profitability ratios. Loan growth may require more retained capital. Funding costs and rate cuts may pressure margins. Expenses are rising quickly. Liquidity and capital ratios are moving in the wrong direction. If those trends persist, dividend growth may become slower, more cautious or more dependent on fee income and operating efficiency gains.
For shareholders, the story is not whether BDO can pay more. It likely can. The more important question is whether it should — and how fast.
In 2025, BDO proved it remains the Sy group’s premier banking cash generator. But it also showed that even the country’s biggest bank must choose carefully between rewarding shareholders today and preserving capital for tomorrow’s growth. The dividend runway is still open. The traffic on it is getting heavier.
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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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