BDO President Nestor V. Tan told reporters in a briefing prior to the annual shareholders meeting yesterday that the bank is undeterred by the escalating operations expense and the expected hike in interest rates.

Tan disclosed the budgeted net profit for this year has been placed at a 13 percent growth from P6.75 billion in 2007 to P7.407 billion.

BDO, plans to raise up to P15 billion in unsecured subordinated debt this year to boost capital and pay debts early. The issue would be done in tranches, with the first tranche of R5 billion to be used to refinance an existing $ 200 million Tier II issue callable in July. The start of the public offer is slated on 12 May 2008. The additional capital raising activities are being undertaken to support future growth and refinance US$ 200 million of existing Tier 2 Notes which are callable by July 2008.

"Increase in interest rates will not have much impact in lending, if interest rates increased continuously, we would have difficulty. We believe the economy will support," said Tan.

This as he believed the macroeconomic fundamentals will stay relatively solid for the year, though the pace of economic growth expansion will slow down as an after effect of recent market developments here and abroad.

Tan said the bank has assumed gross domestic product (GDP) will remain in the positive territory but slower at 5.8 percent for the year from a high of 7.3 percent registered last year.

The strong income growth project of BDO is anchored on the sustained uptick in consumer spending as well as corporate, where lies the cut-throat competition.

Other growth drivers will be expansion in loan availments and hike in deposits. These two factors are projected to pull up the bank’s net interest and feebased revenues.

BDO expects net loans to increase by 16 percent to P325.342 billion this year while its total deposits is expected to expand by 27 percent to P566.385 billion.

"We expect good growth in lending," said the bank president.

Competition will be more intense as banks go after the same prime borrowers, Tan pointed out.

"The high trading environment will not repeat itself, it’s a structural thing," he stressed, adding that the bank management has already considered "intense competition as everybody will focus on fundamentals and more consolidation."

But, he admitted that higher operating expenses due to the cost push reaction of higher inflation rate environment as well as an expected drop in trading gains will drag down the bank’s profitability.

This year BDO is projecting to shell out in operating expenses of P28,773 billion, for a 16 percent hike year-on-year due to the on-going mergers into the main operations of the mother the branches of Equitable PCI Bank and Amex Savings Bank.