Q1 2026 underscored why BDO still dominates in scale, while BPI leads in efficiency and returns.
In Philippine banking, size and finesse rarely travel in equal measure. BDO Unibank, the country’s largest lender, resembles a financial archipelago unto itself: vast, deposit-rich and deeply embedded in the cash flows of households, malls, merchants and corporations. Bank of the Philippine Islands, older and more patrician, looks less like a sprawl and more like a carefully tuned machine. The first quarter of 2026 offered a useful contrast. Both banks made more money than a year earlier. Both were bruised by bond-market losses. But the manner of their performance revealed two quite different banking models. BDO still won on scale; BPI won on efficiency.
BDO reported net profit of ₱20.2bn, up 2.1% year on year, while BPI earned ₱17.0bn, up about 1.8%. On the surface, the larger bank won. Yet profit is only the first sentence of the story. BDO generated pre-impairment operating revenue of roughly ₱74.9bn, against BPI’s ₱50.9bn. On that basis, BDO’s net income margin was about 26.9%; BPI’s was a sturdier 33.4%. BDO earned more pesos, but BPI kept more of each peso it earned.
The contrast is sharper in the operating ratios. BPI reported a net interest margin of 4.57%, comfortably ahead of BDO’s 4.20%. BPI’s return on equity was 14.25%, compared with BDO’s 12.78%; its return on assets was 1.87%, versus BDO’s 1.47%. The old Ayala bank, in other words, extracted more profit from a smaller balance sheet. It also ran with a leaner cost structure: BPI’s cost-to-income ratio was 46.15%, while BDO’s comparable calculated ratio was around 58%.
Yet to dismiss BDO as merely heavier would be a mistake. Banking is not software; bulk has its uses. BDO ended March 2026 with ₱5.71trn in total resources, against BPI’s ₱3.70trn. Its deposit base was ₱4.43trn, more than one-and-a-half times BPI’s ₱2.84trn. Its net loans stood at ₱3.79trn, compared with BPI’s ₱2.55trn. In a country where funding franchises are painstakingly built branch by branch, salary account by salary account, and merchant relationship by merchant relationship, that scale is a formidable moat.
The funding picture also favored BDO in the quarter. Its deposits grew 5.7% quarter on quarter, while BPI’s barely moved, rising 0.2%. BDO’s loan-to-deposit ratio was about 85.6%, lower than BPI’s 89.8%, suggesting somewhat more funding flexibility. BPI, for its part, compensated with better profitability and capital density: its equity-to-assets ratio was around 13.0%, ahead of BDO’s 11.3%, and its capital adequacy ratio was 14.94%, compared with BDO’s 14.43%.
Both banks, however, were reminded that securities portfolios can be quiet until they are not. Rising yields and weaker market valuations led to sharp mark-to-market losses in other comprehensive income. BDO recorded a ₱16.0bn net unrealized loss on FVOCI debt securities, while BPI booked a ₱13.6bn net change loss on FVOCI securities, net of tax. But BPI’s total other comprehensive loss was heavier at ₱14.2bn, compared with BDO’s ₱12.3bn, because BPI also absorbed negative valuation effects from associates and insurance-related investments.
The result was striking. BDO’s total comprehensive income fell to ₱7.9bn, from ₱22.8bn a year earlier. BPI’s fell even more sharply, to just ₱2.9bn, from ₱18.3bn. These are not the same as cash losses in the lending book; they largely reflect valuation changes in securities carried through equity. But they matter. They are a reminder that Philippine banks are not simply loan factories. They are also large holders of fixed-income assets whose book values move with bond market turns.
Credit costs were another common irritant. BDO’s impairment losses more than doubled to ₱6.1bn, from ₱3.0bn a year earlier. BPI’s rose to ₱5.5bn, from ₱3.0bn. In both cases, higher provisions muted the effect of strong revenue growth. BDO’s net interest income rose 11.0% year on year to ₱53.0bn; BPI’s rose even faster, by 13.7%, to ₱39.1bn. Without the larger credit charges, the quarter would have looked much livelier.
There is, nevertheless, a subtle difference in what the provisions imply. BDO’s larger loan book and broader commercial exposure make provisioning a natural by-product of expansion. Its March 2026 aging schedule still showed most loans and receivables current, with past-due items manageable relative to the total. BPI disclosed an NPL ratio of 2.42%, describing it as acceptable and below the industry’s published NPL ratio, while pointing to business banking, consumer loans and borrower-specific corporate risks as drivers. Both banks appear to be building buffers rather than signaling distress.
Strategically, the two franchises seem built for different temperatures. BDO thrives when the economy’s volume grows: more deposits, more payrolls, more remittances, more cards, more corporate transactions, more trade finance. Its scale gives it optionality. It can absorb shocks, cross-sell across a sprawling customer base, and defend market share with a balance sheet few rivals can match. Its Q1 results were not elegant, but they were muscular.
BPI’s model is cleaner. It has less bulk, but better conversion. Its margins are wider, its cost ratio lower, and its returns higher. It appears more like a well-capitalized premium bank: selective, more efficient, and less dependent on sheer size. The risk is that such a model leaves less room for sluggish volume growth or sudden valuation shocks, as Q1’s comprehensive-income collapse showed. Still, if one were ranking banks by quality of earnings rather than absolute earnings, BPI would have the stronger claim in this quarter.
For investors, the distinction is useful. BDO is the bank to own if one believes Philippine banking rewards scale, deposit dominance, and system-wide reach. BPI is the bank to own if one prizes margin discipline, return on equity, and cost efficiency. Neither thesis was disproved in Q1 2026. In fact, both were reinforced. BDO looked like the larger fortress, even if its operating efficiency was less impressive. BPI looked like the sharper instrument, even if its securities marks cut deeper into comprehensive income.
The lesson of the quarter is that Philippine banking is becoming less forgiving. Rate movements now visibly disturb capital accounts. Provisioning is eating more of the revenue pie. Funding costs remain competitive. In that environment, BDO’s size is not a substitute for efficiency, and BPI’s efficiency is not a substitute for scale. The winner depends on the question being asked. If the question is “Who earns more?” the answer is BDO. If it is “Who earns better?”, the answer for Q1 2026 is BPI.
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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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