Okay. Good afternoon, ladies and gentlemen.
Welcome to our earnings call to discuss BPI's results for the Q4 and full year of 2025.
I'm Haj Narvaez, your moderator for this session. Just as a reminder, we're conducting this briefing in a hybrid manner with our BPI speakers and panelists here in our headquarters at Tower two of Ayala Triangle Gardens, Makati City.
We also have some participants who are dialing in remotely. I am pleased to introduce you to our speakers and panelists this afternoon. First, Jose Teodoro K. Limcaoco, our President and CEO. Eric Luchangco, CFO and CSO.
They will also be joined in the panel for the Q&A by Tere Marcial, Head of BPI Wealth. Ginbee Go, Head of Consumer Banking. Luis Cruz, Head of Institutional Banking.
Jenelyn Lacerna, Head of Mass Retail Products, and Dino Gasmen, Treasurer and Head of Global Markets. We are also joined by the rest of the BPI leadership team in this call.
This afternoon's agenda will begin with opening remarks from our President and CEO, Jose Teodoro K. Limcaoco, followed by our CFO and CSO, Eric Luchangco, who will walk you through the Q4 and full year performance highlights, as well as provide updates on our digital platforms and strategic initiatives.
The floor will then be open to questions from the audience. Please note the call is being recorded and legal disclaimers apply. Now, let me turn you over to TG for his opening remarks.
Thank you very much, Haj, and very nice welcome to everyone joining us on this call today, both here at Tower Two and virtually.
Very happy to report that despite the domestic issues that this country faced towards the second half of last year, BPI managed a 7.4% increase in our net interest income after tax to PHP 66.6 billion. The details of which our CFO, Eric Luchangco, will go into.
This was really driven from my perspective by our disciplined funding and our disciplined pricing on loans, which also grew 14.7%, much faster than the industry, and allowed us to maintain our NIMs. Our net interest income grew 14.7% for the year. We also managed to keep OpEx growth at 9.9%, much slower than previous years.
Really, for me, one of the big achievements here was our ability to manage our tech spend, which, if most investors would recall in the early years, was growing at 28, 25%. Previous year, we grew at about 14%.
This year we only grew at 12%. We see that that tech spend should continue to moderate going forward as we make changes in our tech stack and look at other vendors to supply our technology. Part of Eric's presentation today will also be to give more details on our provisioning.
I know there's been some questions about that, and so we're happy to present some of our thinking behind it, and also to take questions in detail about our provisioning and the risks we are taking as we shift our book to more consumer-oriented.
Eric will also delve into a review of our progress on our strategic initiatives, but I'd really like to point out our success in three fields, our sustainability, our transformation of our branches, and our agency banking.
Finally, I think we'll have a Q&A at the end where I will be joined by our major business leaders as well as the rest of the senior team who's here, physically present. In line with our real desire to be as open to our investors, we'll answer any questions.
With that, Eric, I'll turn it over to you.
Thank you, TG. Good afternoon, and thank you to everybody joining us for our Q4 and full year 2025 earnings call.
We're pleased to report that the bank delivered another year of strong results, leading to another year of record income, the highlights of which are as follows.
On profitability, the bank delivered a solid full year net income of PHP 66.62 billion, a 7.4% increase from the previous year, driven by strong revenues and positive jaws. Q4 earnings of PHP 16.13 billion, up 14.7% year-on-year, highlight strengthened profitability without the typical seasonal boost. Overall, sustained performance led to a robust full year return on equity of 14.5% and return on assets of 2%.
The balance sheet continued to expand, with loans up 14.7% year-on-year to PHP 2.6 trillion, while deposits rose 8.6% to PHP 2.8 trillion.
The bank maintained a solid financial position with liquidity and capital buffers comfortably above regulatory minimums. Capital strength remains robust, with an indicative CET1 ratio of 13.9% and a CAR of 14.7%.
Overall, asset quality remained healthy with sufficient cover. The NPL ratio stood at 2.18%, rising 6 basis points year-on-year, but improving 11 basis points quarter-on-quarter. Coverage remained adequate with NPL cover at 94.9%. The bank continued to expand its customer franchise, growing its client base to 18.2 million.
Our nationwide reach accelerated through a network of 7,000 agency banking partners, enabling faster and more accessible services. Our wealth management business strengthened its role as a key growth driver, achieving record net funds contribution and record AUM of PHP 1.9 trillion. In the Q4, we delivered a net income of PHP 16.13 billion, down 8% on the sequential quarter. Primarily from higher provisions and the usual spike in operating expenses that we experienced in the Q4.
Compared to the same quarter last year, net income rose 14.7%. Strong revenue expansion more than compensated for the 8.9% increase in expenses, and a 233.3% increase in provisions.
Total revenues grew 19.3%, with net interest income up 15.5%, supported by a 14.7% loan growth and a 22 basis point improvement in NIM, while fee income increased by 16.3%, pre-provision operating profit rose a robust 32.1%. For the full year of 2025, we delivered a record net income of PHP 66.62 billion, up PHP 4.57 billion or 7.4%, supported by record revenues that more than offset higher operating expenses and provisions.
These results included revenue of PHP 195.28 billion, up 14.8%, driven by record net interest income of, which was up 16.0%. Trading income of PHP 8.29 billion, which surged 21.3% as we capitalized on declining interest rates in the Q3 to lock in some gains. Record fee income of PHP 38.96 billion, up 9.1% on sustained volume growth in FX, key fee businesses.
Operating expenses were up 9.9% from volume related expenses and continued investment in people, products, and technology. Pre-provision income at PHP 103.17 billion was up PHP 16.83 billion or 19.5%. Provisions increased 168.9% to PHP 17.75 billion, resulting in a net income of PHP 66.62 billion.
Looking at the shareholder returns, earnings per share grew for the fourth straight year, reaching 12.62 per share, a 7.1% increase from the previous year. Sustained earnings supported profitability with ROE at 14.5% and ROA at 2%. Moving on to the balance sheet. Total assets reached PHP 3.65 trillion, reflecting a 10% year-on-year increase driven by higher loans and securities investments. Gross loans grew by PHP 2.62 trillion, up 14.7% year-on-year and 8.5% quarter-on-quarter, with broad-based expansion across all segments.
Deposits increased 8.6% year-on-year to reach PHP 2.84 trillion, primarily from growth in time deposits. CASA ratio finished the year at 60.7%, while the loan-to-deposit ratio reached 92.4%.
Credit demand remained strong, with gross loan growth accelerating 8.5% in the Q4. Year-on-year, loan growth eased from 18.2% in 2024, but remained robust, increasing by PHP 336 billion or 14.7%, and outperforming the 9.7% industry average for universal and commercial banks.
Non-institutional loans accounted for close to half of that growth, rising PHP 163.9 billion or 25.8% year-on-year. Non-institutional loans posted steady gains, with SME loans up 79.7%, credit card loans up 31.9%, personal loans up 28.3%. Personal loans include PHP 16 billion of teacher's loans, which increased 83% year-on-year. Auto loans was up 22.9%, with auto loans including PHP 5 billion in motorcycle loans, which also increased 23% year-on-year.
Mortgage loans was up 15.7%, and microfinance loans up 15.3%. This loan expansion highlights the bank's strong momentum even against a higher base following robust expansions for non-institutional loans in 2024 and 2023. On NIMs, our annual NIM has expanded consistently since 2021, reaching 4.59% in 2025, up 28 basis points from last year, fueled by a 26 basis point jump in asset yields, supported by a larger share of retail and SME loans, and a slight decline in funding costs.
On a quarter-on-quarter basis, though, NIMs fell by 4 basis points to 4.58%. This was mainly due to a drop in loan yields from the institutional loans as this segment adjusts faster to the policy rate movements.
Please note that in the left chart, we also show a risk-adjusted NIM, which is based on NIM adjusted for the net NPL formation. Despite the drop in policy rates, risk-adjusted NIMs for 2025 hit 3.97%, up 36 basis points year-on-year, which is our highest figure over the past five years. On funding, we're optimizing funding by shifting from time deposits to bond issuances, which are supported by incentives for sustainable financing, resulting in a lower effective yield versus top TD rates.
While deposits remain the core funding source, borrowed funds grew 37% and now account for 7% of total funding. Key funding ratios remain fairly stable, with a loan-to-deposit ratio of 92.4% and loan-to-total funding at 85.7%. We continue to prioritize strengthening our deposit base with greater focus on CASA.
Our CASA mix remains predominantly retail, comprising 77% of the total, including contributions from microfinance and SMEs. Growth in CASA is being driven by the core mass and mid-market segments, driven by expansion in the client base and higher average balances.
We saw sustained growth in fee income, up 9.1%, led by our biggest fee businesses, cards, wealth management, and insurance, which collectively contribute about 60% of total fees. Card fees grew by 13.8%, driven by an 8% increase in customer count, 17% increase in transaction count, and 4% increase in average transaction amount, contributing to a 21% increase in billings from retail, cash advances, and installment loans.
Wealth management fees increased 6.6% on record net contribution from clients.
AUM soared 18.7% to close the year at PHP 1.91 trillion, led by a 16.2% increase in private wealth, 23.7% increase in personal wealth, and a 17.7% jump from the institutional business. Wealth's client base reached 1.46 million, up 26.3% year-to-date September. Year-to-date September, our market share in the trust industry rose by 35 basis points to 21.1%. We hold a commanding market share in investment funds at 31% and a 30.5% market share in employee benefits.
Income from insurance, up 11.4%, is comprised of, one, equity income from joint ventures, two, royalty fees, and three, branch commissions.
In 2025, equity income was up 13.6%, royalty fees up 21.6%, and branch commissions up 4.6%, following a high base in 2023 and 2024, driven by the launch of new products.
These increases were partly offset by the decline in fees from retail loans, which was down 10.2%, largely due to the absence of last year's one-off collections from housing loan penalties and late payment charge adjustments following the curing of CTS accounts. ATM and digital channels down 3.9% as the bank discontinued its e-wallet loading service for GCash and Maya. Remittances down 2.8% due to heightened competition from a new market entrant leveraging InstaPay and PESONet-enabled transfers.
Branch service charges down 2.6%, owing partly to 4 fewer banking days versus last year and the continued migration of over-the-counter transactions to online channels. Credit quality remains healthy, even as portfolios expands into higher-yielding segments. NPLs increased to PHP 56.9 billion, but the NPL ratio remained broadly stable at 2.18%.
Provisions totaled PHP 17.75 billion, bringing credit costs to 75 basis points for the year. NPL coverage remains adequate at 94.9% and strengthens to 122.9% under BSP Circular No. 941, providing a solid buffer against potential credit losses. Across segments, except for institutional loans and in particular SME mortgage, microfinance, and auto loan segments all recorded year-on-year increases in their respective NPL ratios.
The credit card NPL ratio increased by 30 basis points year-on-year to 4.68% and remained stable quarter-on-quarter. The rise in NPL is largely driven by test programs which account for 59% of the volume, while regular programs account for the remaining 41%. Delinquencies are concentrated in three groups: younger clients aged 40 and below, lower-income borrowers earning less than 40,000 per month, and post-pandemic acquisitions booked between 2022 and 2024.
The personal loan NPL ratio also increased, rising 172 basis points year-on-year to 7.16%. Similar to cards, deterioration is coming from younger and lower-income borrowers, including 2025 vintages. Accounts sourced through universe expansion programs. To mitigate further deterioration, we tightened credit score cutoffs with early post-implementation results, showing reductions in NPL ratios.
We also enhanced early-stage delinquency detection and strengthened collection efforts. These measures are expected to support improved NPL performance in 2026. The microfinance NPL ratio increased 25 basis points quarter on quarter and rose by 277 basis points to reach 13.3%. The rise was primarily driven by a test program that offered higher loan amounts and longer tenors to existing clients. The quarter on quarter uptick increase reflects the impact of recent typhoons in the Visayas, which disrupted operations of certain BPI borrowers.
Overall, however, recent loan bookings are performing better following the tightening of credit score requirements. SME NPL ratio remains stable, but increased 192 basis points year on year to 7.25%, largely driven by strong loan growth. SME loan balances doubled in 2024, which initially kept NPL ratio low.
As loan growth more recently moderated slightly, the NPL ratio normalized into the 7%-8% range, which reflects typical SME portfolio behavior. NPL formation is mainly coming from regular or non-program loans in the lower ticket segment. Select high ticket exposures. While high ticket cases represent less than 1% of the total NPL accounts, their larger loan sizes impact the overall NPL levels.
No significant concentration has been observed by industry or by geography. Delinquencies are broadly distributed, indicating portfolio-wide, not sector-specific drivers of NPL formation.
Finally, in addition to NPL coverage, we report ECL coverage at 100.9%. As shared during our previous earnings calls, our provisioning approach is anchored on ECL, which provides a forward-looking estimate of potential losses.
Operating expenses rose by 9.9% year-on-year, primarily driven by technology, manpower, and other expenses, which includes marketing rewards, business volume-related expenses, and third-party fees. These investments have strengthened the bank's position. We added 2 million new customers since the start of the year, bringing our total customer count to 18.2 million.
We enhanced our nationwide reach in a cost-effective way, rationalizing our branches, while expanding our agency banking partners. We achieved operational efficiencies, reducing cost-income ratio further to 47.2% in 2025. CET1 capital stood at PHP 401 billion, up PHP 34.9 billion from last year on net income accretion.
The CET1 ratio declined 115 basis points quarter-on-quarter, but was flat year-on-year as earnings generation offset the drag from a higher dividend payout and robust loan growth. Capital ratios remained well above regulatory and internal thresholds and sufficient to support continued loan expansion.
Strong earnings has supported sharp increases in capital distribution with the implementation of the variable dividend payout effective 2022. In 2025, the bank declared a total cash dividend of PHP 4.36 per share, up 10.1% from 2024 and 142% from the fixed dividend payout, dividend amount paid out in 2021 and the prior years.
We show here a table that shows the revenues associated with loans covering the full year 2025, 2024, and 2023, and the respective net NPL formation for each loan book for the periods. From 2023 to 2025, revenues across the loan book increased by PHP 40.4 billion, which is more than three times the PHP 12 billion increase in net NPL formation.
The non-institutional segment contributed PHP 33 billion in revenues, surpassing the PHP 17.3 billion increase in net NPL formation, a pattern observed consistently across all loan segments. The loan revenue uplift is driven by the sharp growth in non-institutional volume, which in turn drove the shift in loan mix toward higher yielding segments and the increase in fee income associated with higher loan volume. Revenues have outpaced the costs.
Despite the rise in provisions, the pivot toward non-institutional loans has delivered value and validates the bank's direction to grow the share of non-institutional portfolio in the loan mix. While institutional loans are, and will remain, a core part of our portfolio, non-institutional loans are the segment with the greater growth opportunity, consistently delivering loan yields averaging above 12%, even after factoring in credit costs or net NPL formation. Non-institutional loans continue to show greater risk adjusted returns.
Non-institutional loan growth has outpaced institutional loan growth, contributing to the uplift in overall profitability as there is greater availability of untapped opportunities here. Just to highlight again the higher relative returns on the non-institutional segment, we show you a comparison of the return on assets for both the institutional and non-institutional lending segment, as well as the resulting ROA for the bank's lending business.
For this exercise, please note that we used ECL formation, which largely dictates our current provisioning rather than the net NPL formation. Or our actual provisions in arriving at the ROA. This way, we net out the effect of higher overlays in prior years. As can be seen, the non-institutional lending business has delivered ROA of around 4% or higher over the period versus the sub-3% ROA of the institutional lending business.
The increased share of non-institutional loans results in a blended ROA for the lending business of 3.2% in 2025, above the bank's overall ROA of 2% for the same year. Segments that posted the highest adjusted ROA, with each enjoying a figure north of 3.5%, were personal loans, credit cards, and microfinance.
We believe this justifies the increased allocation of resources towards the non-institutional loans and shows that the risk-adjusted returns of the non-institutional business, including those of unsecured segments, remain stellar, notwithstanding concerns about periodic spikes in the rate of the NPL formation.
At this point, allow us to update you on what we have accomplished in 4-plus years since we first shared with you our key strategic initiatives, which include increasing the share of consumer and SME loans or the non-institutional segment in our loan book, establishing ourselves as the undisputed leader in digital banking, using branches as sales stores more than service points, closing the gap in funding leadership, and promoting sustainable banking. Our lending business continues to show strong momentum underpinned by sustained growth across all segments. Our loan portfolio expanded PHP 2.62 trillion.
To reach PHP 2.62 trillion, rising 14.7% year-on-year and posting a solid 14.3% three-year CAGR. Both institutional and non-institutional segments contributed significantly, but non-institutional lending remains the primary growth engine, growing at an exceptional 29.5% three-year CAGR, while institutional loans accelerated at a very respectable 9.5%.
This faster growth has driven a big shift in our loan mix. By 2025, non-institutional loans accounted for 30.5% of total loans from only 21.1% in 2021. This achievement places us one year ahead of schedule in reaching our loan mix target of 30% non-institutional, which underscores the strength of our execution and growing relevance of our consumer franchise. Overall, we've gained significant market share since 2021, as shown on the right-hand table.
Market share in gross loans was up 170 basis points, credit cards up 245 basis points, auto up 520 basis points, and mortgage loans up 465 basis points. As expected, the expansion of non-institutional loans increased the NPL level, but the NPL ratio continued to decline due to the faster growth of the loan portfolio and write-offs in the non-institutional loan book.
Credit cost was 93 basis points in 2021, or 18 basis points higher than in 2025, reflecting the elevated provisioning during the COVID-19 period to maintain sufficient NPL and ECL coverage. In line with our commitment to digital leadership, the bank continued to scale seven client engagement platforms, which are delivering steady growth in enrolled and active users.
Transaction volumes continued to shift toward digital channels, supported by new partnerships, enhanced functionalities, and continuous platform improvements. Starting from the left, the BPI app, our main operating app for retail clients, now includes a buy and sell US dollar facility, regular subscription plans for investments, mobile check deposits, and virtual privilege cards, which broaden the app's role in facilitating everyday financial transactions.
We also enhanced payment efficiency by reducing the InstaPay fee to PHP 10 and adding over 600 new billers. In addition, BPI to BPI transfers remain free, and continuous refinements to the consumer interface and navigation are improving overall ease of use. For VYBE, our e-wallet, sign-ups have reached 2.5 million, with 78% being VYBE Pro users.
The BPI BizLink facility for corporate clients introduced key upgrades, including web approvals via SMS OTP, mobile multi-factor authentication, Pay Foreign with multicurrency, and express check deposit to seamlessly migrate clients to the mobile app and provide ease of transaction approval. The BPI BizKo app for SMEs now serves nearly 30,000 users, boosted by ePayroll and Salary On-Demand services, which aim to bring unified payments for our clients and drive usage.
The BPI Direct BanKo app remains central to financial inclusion, offering simplified deposits and access to accessible revolving credit. BPI Wealth Online serving high net worth individuals through active users to 2,800, up 82% year-on-year through sustained activation initiatives. Finally, BPI Trade continues to strengthen engagement among equity investors with higher transaction count in 2025, and new features such as e-registration, e-deposit, and e-reserve to widen accessibility.
Across all platforms, we continue to expand the capabilities and open banking and improve UI/UX for a more seamless experience. As of December 2025, we have 131 API partners, up from 74 in 2019, supporting over 17,000 brands, up from only 749 in 2019. Despite our strong push towards digitalization initiatives, we continue to invest in our physical network by opening branches in targeted growth areas, even as we consolidate and co-locate branches to optimize our footprint. In 2025, we further rationalized our branch footprint, opening 3 and relocating and consolidating 37 others.
The remaining branches will be redesigned into phygital, prime phygital, and flagship formats, depending on the target segments, customer experience, and location. This approach allows us to deliver a differentiated customer experience by leveraging on our both physical stores and digital capabilities.
Our branches have undergone a significant shift in their role from primarily handling day-to-day transactions to serving as advisory centers. A few years ago, only 30% of branch personnel time was dedicated towards advisory, while 70% was spent on operations. As of December 2025, operations work has decreased to forty-six percent, while advisory now accounts for 54%.
A significant shift that reflects our transformation towards higher value customer engagement. At the bottom of the slide, we highlight the branch performance following its transformation into a phygital format. 6.5% increase in monthly gross acquisition, 31.8% increase in average monthly net acquisition, 8.6% increase in deposit ADB, 11% increase in digital customers, and an improvement of 15.5 percentage points in the internal NPS survey for branch stores.
Closely linked to our branch rationalization initiative is our growth in our agency banking, which continues to strengthen the bank's presence beyond branches. We expanded the agency banking network to 32 partners and 7,000 partner stores, driven largely by partnerships with leading brands that strengthened our footprint, particularly in Visayas and Mindanao.
What began as product onboarding partner stores has scaled rapidly. 987 of these stores are now enabled for deposit, withdrawal transactions across 18 partner brands, thereby broadening our ability to serve customer segments nationwide. In 2025, total products sold reached 515.3 thousand, a five-fold increase from the 95.7 thousand recorded in 2024.
This growth was supported by a significant jump in productivity to 74 from only 15 in 2024, with insurance and deposit as a primary product. Deposits and withdrawal transactions grew sharply, supported by an increase in enabled stores and stronger marketing efforts. Transaction value and volume were nearly 12 times that in 2024, reinforcing agency banking as a viable initiative to increase deposits.
More clients can now access a transaction facility with the rollout of RRHI touchpoints covering seven brands and 474 stores using a barcode generated in the BPI Mobile app. Looking ahead to 2026, we will accelerate the expansion of transaction-capable stores to 2,000 and elevate the customer experience. We will deploy dedicated brand ambassadors who will guide clients through product inquiries, applications, and cash transactions within partner stores.
The bank delivered a solid deposit growth from 2021 to 2025, with deposits rising 45.2% to PHP 2.8 trillion. Both CASA and time deposits increased, although the growth was led by time deposits, resulting in a decline in the CASA ratio by 16 percentage points to 63.2%. Despite the headwinds in CASA, market share and total deposits improved 67 basis points to 12.04% in 2021 to 12.71% in 2025.
Corporate CASA growth remains challenged, while enrollment and transaction activity on BPI BizLink increased, overall penetration and client engagement show room for improvement. To address this, we continue to enhance our capabilities to become the main operating bank of our clients and capture the full ecosystem of their transactions.
This includes positioning BPI as the aggregator by enabling real-time payments and notifications, multi-channel reporting, and innovative collection solutions. These initiatives aim to strengthen client engagement and accelerate CASA growth. Retail deposit acquisition continued to be a core strength. The number of new to bank deposit clients grew at a 30% CAGR over the past 5 years, driven by digital onboarding, which surged 240%, far outpacing the 14% CAGR for branch-acquired accounts.
By December 2025, CASA book via digital channels reached 38 times its 2021 level. We also managed to increase the average balances of existing or tenured CASA year-on-year. Our client base now stands at 18.2 million as we onboarded 2.2 million customers in 2025, further advancing our financial inclusion efforts.
The year was marked by major ESG milestones, including the bank's largest sustainability bond, the PHP 40 billion SINAG bond, which was 8 times oversubscribed, the conversion of 70 BPI branches to 100% renewable energy, and BPI's pioneering membership in the Alliance for Green Commercial Banks in Asia.
This Friday, we will issue and list the 2-year peso BPI Supporting Individuals to Grow, Lead, and Achieve Bond, or BPI SIGLA Bonds. This will carry a green and social bond label as affirmed by SEC. Other highlights include, under responsible banking, 4 new sustainability-focused products in insurance and remittance. BPI developed AI programs for environmental and social due diligence on global and local investments. Numerous ESG-focused financing deals with key deals supporting solar, wind, and water projects in the Philippines and Southeast Asia.
For responsible operations, BPI is the first Philippine bank to publish its decarbonization strategy roadmap for scope one and scope two GHG emissions. By December 2025, we had a total of 44 IFC EDGE-certified green branches, doubling from 22 last year. The bank expanded its customer touchpoints through the MyBPI Dito initiative to 32 partner brands and over 7,000 stores nationwide.
Finally, for sustainability governance and risk management, BPI expanded its sustainability framework, adding 17 new eligible green, blue, and social categories. The bank also refined its E&S exclusion list and introduced a consolidated human rights policy aligned with the Universal Declaration of Human Rights. Allow me to conclude with a summary on profitability. We delivered continued improvement in profitability for the 4th consecutive year of record income led by revenue growth.
On the balance sheet, we delivered strong, broad-based loan growth led by non-institutional segments, while the bank's liquidity and capital positions remain above regulatory thresholds. On asset quality, we maintain strong asset quality with sufficient cover. Finally, we sustained strong ROE and delivered increased dividends. We closed 2025 with confidence in our strategies and momentum. We navigate a challenging environment. We remain focused on delivering consistent performance and creating value for all our stakeholders.
Thank you, and we will now open the floor for questions.
Thank you, Eric. Before we open the floor to your questions, please allow us a minute or two to set up at the venue.
If you are joining us via Zoom, there are two functions at the bottom of the Zoom webinar screen which you may use to queue.
One is the raise hand function. The host will then prompt you and unmute your line for you to speak. Alternatively, you may type your questions in the Q&A box, and we will read out your question on your behalf. For those on site, you may use any of the mics available at the floor, or you may raise your hand, and we will have someone hand the mic to you.
Just as a reminder, please identify yourself by your name and company so we can address you accordingly.
For the benefit of everyone attending this call, whether in person or online, we would like to encourage you to ask your questions during this session. Please note that we will refrain from taking questions after we end this call.
Joining us here in front with TG and Eric are our senior leaders. First, Tere Marcial, Head of BPI Wealth. Ginbee Go, Head of Consumer Banking. Luis Cruz, Head of Institutional Banking. Jenelyn Lacerna, Head of Mass Retail Products. And Dino Gasmen, Treasurer and Head of Global Markets. Perhaps we can take if there's anyone in the audience who has questions, please go ahead. DA?
Yeah. Hi. Thank you. DA from JP Morgan. First question on asset quality. Q4, if you look at NPL formation, we estimate it to be around PHP 7 billion. It's higher than Q3. Just want to understand any reason behind it, any one-offs in Q4 that moved up?
No specific one-offs. It really is just some of the movements that we saw. For one thing, like we've said, we're focusing on the ECL as the key basis on which we're going to be providing, because again, it's forward-looking. There were some adjustments to the MEV. That's when you saw the weakening GDP numbers from the Q3 move into our model, and therefore that created some of the adjustments that we're looking at.
If you look at NPL formation, which segments drove the formation in Q4?
It was credit cards, one of the significant contributors to that. Actually, that was probably among them, probably where we saw the bulk of the movement.
Okay. Your Q4 credit costs around close to 100 basis points. Just Q4, right? Going forward, what do you expect these flipping into 2026?
Moving forward, credit costs, we estimate in the kind of 80-ish basis point range.
Okay. The drivers behind is what you mentioned earlier on the tightening of credit standards and so on. Is that fair?
The driver to keep it in check.
The driver to keep it lower than Q4, I guess.
Yes. Yes.
That's my question on asset quality. Just another one on growth. Looking into this year, given the macro situation as well, we've beaten actually loan growth in Q4, but do you think this year, what's the outlook on that one?
overall obviously we kind of carry forward this, in a sense, a lack of momentum that we've had over the third and Q4 into the beginning of the year. Yet we remain, we continue to believe that there is the opportunity for this to turn around quickly. A lot of the slowdown has been sentiment driven rather than fundamentals driven, which means that with a turnaround in sentiment, which can happen quickly, things can turn around. That being said, we approach the year with a fairly cautious approach, but with the mindset that we will retain the ability to move quickly as we see the circumstances turning around.
Any guidance on growth and across segments?
Loan growth you mean?
Yes.
Loan growth we expect to be in the low teens. Basically, weaker than the 14.7% that we saw last year, but still in double digit territory. Call it in that kind of maybe 12%-13% range.
Just last one from me on treasury. I think last year, pretty punchy number around PHP 8 billion. Any thoughts on how we should think about this year? Also within the PHP 8 billion, how much would you say is customer flow or more recurring type of treasury?
Hello.
Thank you.
Yeah, thank you for the question. Good afternoon, everyone. Well, last year's trading income was driven really a lot by changes in monetary policy. The BSP cut by, I think, about 125 basis points.
The Fed also was cutting last year. So I think that provided the opportunity to generate trading gains. Looking at 2026, I think the expectation is much less cuts. Our own economy is saying probably 50 basis points from the BSP. In the US, I think the forecasts are very diverse. Some say none, some say 2-3. So I think this year trading gains are probably going to be less. The opportunity I think is on the steepness of the curves.
A lot of, well, the carry should be good this year because of the steepness of the curves. Lastly, on close, I think I'm not sure right now, but I think about 20%-30% of that were close. Yeah. Thank you.
Okay. We actually have a question in the Q&A box.
The first question in the Q&A box is from Tan Yong Hong of Citi. I'll actually pass this over to Louie Cruz. How is corporate client sentiment for this year? Are they turning more cautious or more positive after the government budget? And are CapEx loans coming back?
Thank you. Good afternoon. Okay. For this year, comparing it to last year, when we started 2025, we had a very good visibility of the pipelines of all the projects, and you can see significant projects. For this year, it's slightly lower versus last year. The thing is, we have standby facilities. It's I guess you can see how corporates are thinking now. They're more cautious.
T hey're also seeing opportunities given how the market would go first half or second half, depending on how this whole issue would come out this year. The facilities are there, but the visibility compared to last year is slightly lower. Now, for institutional banking overall, the growth that we're seeing, we're seeing about 8%-9% still on the growth based on the visibility.
this will all depend also on the working capital and the opportunity on that. Because not most of them will really avail at this point, but given where the rates are going, again, small companies will have that opportunity to borrow.
The facilities are there ready, and it all depends on the utilization now to bring up the growth moving forward.
Thank you, Louie. Actually, Johan also has a question on consumer growth. I think the answer here is we're looking at low 20% level in terms of year-on-year growth in consumer.
Let me just put it in perspective. The target for this year for the bank is to try to grow our loan portfolio anywhere from 11-13%, at least, is what we're aiming for. Of course, like anything else, that's what we feel we can achieve, but it all depends on how the macro situation turns out. On a segment basis, we're looking at institutional loans, about 8-9%, and the consumer sector growing maybe 20-25%.
Now, as Eric said, the malaise we feel in this country today is, for me, really driven by confidence. I don't think there's anything structural in the country. It's just people feeling uncertain about what's going on, looking for direction, and I think that's something that can turn very quickly.
The bank is prepared if things turn very quickly. Of course, there are some other things that we need to watch out for. You have to look at what the sentiment of the auto distributors are.
When you talk to them, they're quite bullish, right? They're looking at some growth this year. When you look at the mortgage business, you're looking at 2026, and you have to realize that in 2026, we are now really four years, five years away from the pandemic, when nothing got started. No new projects. That's got to play in. If we can see 20% growth in the consumer sector, which is about 30% of our book, and you see 9% growth in the corporate sector, which is about 70%, that will give you something like 12.5% growth.
That's why we feel that's something that should be achieved. The cards business is something that we continue to be quite optimistic about, but also it's a business that we watch very carefully. In the Q4 last year, we had significant NPL.
We had score degradation, and therefore we took provisions for that. That is something that we have looked at and that we are correcting now. It's part of our process where we experiment, we look for new cohorts, we look for new clients, run a few programs, and if it works, we expand it. If it doesn't work, then we cut it very quickly.
Thank you, TG. We also have a question that was typed in from Felix Mabanta of Metrobank. He's asking for some color on the credit card loan growth of 31.9%. Is the growth more a function of existing loans being rolled over, or is it coming from new credit card customers?
To answer that question, it's really a combination of growth in different parts of the business. If you recall, pre-pandemic, we're just acquiring about 200,000 cards per annum, and we're at 400,000 cards per annum post-pandemic. Our retail sales is growing at about 21%, but one of the things that's driving our growth would be installment, which is growing at about 37%. The installment loans are the ones that you see in the stores, where you can actually purchase appliances, bigger ticket items at terms.
Also, loans which are targeted offers to customers who we feel are qualified for our loans. It's really a combination of those three things. Thank you.
Thank you, Jenny. Wanted to check if anyone from the audience had questions. Go ahead.
Thank you. Good afternoon, and I am Liam from F. Yap Securitie s. I just have a couple of questions. The first question is, with the less than ideal sentiments and possible sunsetting this year of the interest rate easing, what can we expect for provisioning in 2026?
For provisioning, I think that's about in the 80-ish basis points, kind of 80-89 basis points in that range is kind of what we're expecting.
All right. For my second question is for the dividend payout ratio. Related to the factors that I have discussed earlier, what can we expect for in terms of the ratio for 2026?
It's still a bit early to be very specific about that. Obviously our dividend payout ratio is a result of where we think loan growth is going to be versus how much income we're generating. Just as a rough guide, given the fact that we think loan growth is going to be a little more muted this year, there's probably room to increase dividend payout ratio a bit.
All right. That's all for me. Thank you.
Thank you. We have a question that's also typed in by Rafael Garchitorena of Regis. Could you please break down the 11 basis point QOQ drop in loan yields? Presumably, it was led primarily by the institutional book. Rafael, confirming this, I think we mentioned this in the call. It is in the message earlier. It's primarily driven by the institutional book. If you'll notice also the weight of the institutional book also went up QOQ, given it was quite strong on a QOQ basis. Thanks. Okay, we have actually another question. This time it's from Abigail Chiw of BDO Securities.
Hi, may we know the outlook for NIMs and NPL levels this year as BPI continues to build up the consumer loan book?
In terms of the NIMs, we expect that NIMs should be fairly stable given that we think that rates are still on a slightly easing trend, right? As mentioned by Dino, our forecast is 2 more rate cuts over the course of this year. The rate cuts from last year will actually also be filtering into the book. That will create downward pressure on our NIMs. However, we expect to continue to shift the loan book towards the non-institutional segment, and that should provide a balancing effect. NIMs should be fairly stable.
On NPLs, I think we're looking for it to remain kind of within the range but slightly growing because of the continued shift towards the non-institutional loan book. Should create a little bit of a lift there, but that's consistent with the direction that we're heading in.
Thank you, Eric. Well, this time it's a question on asset quality that was typed in. This time it's from Melissa Kuang of Goldman Sachs. She's asking on the auto loan side. Could you please elaborate on the key factors contributing to the observed increase in auto loan non-performing loans during this period?
Yes, Melissa. Thank you for the question. The pressure on the NPL for auto loans is coming from our strategy of really going more expansive in our market. It's coming from the lower income, lower risk score segments, which we've then after that tightened. As we go into more and more lending programs, we adjust, we tighten the score and the underwriting parameters.
We've seen the source of these accounts to be coming primarily from dealer-generated accounts. Therefore, we've shifted our books into more of the branch-generated accounts, focusing on our pre-qualified depositor programs. Not to say that we will totally stop or terminate our lending programs. We are looking at balancing risk and reward. Pricing for risk.
Because we still see a lot of opportunities as we go more down market. That's really where the growth opportunities would be.
Thank you, Ginbee. Again, we'd like to open the floor to any questions from the audience. Okay. Sorry. There's a question here from Tan Yong Hong again of Citi, asking for the average risk weight of the corporate versus non-corporate segment. I guess I'll direct this towards you, Eric, but just a question about the capital position looking ahead.
Risk weight, 100% for corporate, right?
Yeah.
Mostly 100% across the non-institutions, except mortgage is what, 20%, right?
Yes. It's less.
Sorry, what was the second part of the question?
The next question is actually about how we feel about our capital position moving forward.
Actually, we think we've got more than sufficient capital, right? This level of practically 14% is more capital than we think we need. It gives us room for continued loan growth. In fact, we think we can bring it down from where we are, which is why, part of the reason why I also mentioned, there's potential for dividend payout to increase moving forward.
Thank you, Eric. Okay. There's a question from Priya Iyer. She's actually asking about the consumer lending space. Are we seeing any deterioration in the client profile? How much do we see the share of consumer moving forward, I guess, over the medium term?
Well, I guess the strategy has always been to try to increase the share of the consumer book as part of our total loan book. Therefore, we will continue to aggressively grow the consumer loan book. Growth in the consumer loan book arises from two things. One is taking more market share from our core clients, meaning obviously we have bank clients, depositors who bank with several banks. We try to get those clients as borrowers at the branch. You also have the core, what would be the traditional client base, I guess the upper segment of what we would call the easy to lend to.
That one, we try to get them, and try to get market share from our competitors by working more closely with dealers, with brokers, giving them offers. The other way to grow your loan book is by targeting new segments, and that's where we have to use our data, that's where we have to be a little more aggressive, and that's where we're willing to take risks.
By opening up into new markets, studying them, and working very closely to shut it down if it doesn't work, as it did in, I think, the Q3 of 2024, and to grow those segments where it's successful. Maybe here is where we go, and I'll turn it over to Ginbee Go to talk about some of the programs where we're targeting the lower.
Our non-traditional segments, the lower end of the markets as we try to expand our customer base. We have a My Bahay program, and we have some programs on the auto side.
Yes, TG. On the new markets that we're looking at, again, I mentioned this earlier. We really want to make credit accessible to more Filipinos. That's part of the bank's aspiration to be more financially inclusive. In which case, we've introduced a number of programs to this end.
One was the My Bahay and MyKotse, which TG mentioned. It basically addresses affordability, and that means extending the loan tenure, lowering the down payment. It's not just about interest rates. Because to the lower income segment, monthly amortization, budgeting for monthly amortization is more important. That's how we're able to also manage the risk, because the yields on these assets would be higher to be able to cover for the higher provisioning or credit cost.
New markets and the use of data would be critical for us to be able to manage the risks on this front. Other opportunities for us would really be on process improvements. We do realize that the ability to turn around and process loans will be critical for us to get and book high quality accounts. The faster you are, the better quality accounts will go to you, and that's what we're continuously addressing.
On this end, we're really looking at AI, piloting agentic AI for particularly for auto loans this year. Eventually, rolling off to other types of loans. Third would be the OneScore. We're looking at it as a credit scoring at customer level.
Because we understand that our customers have different loan borrowing needs, and so the ability to look at it from a total customer standpoint and manage the risk of that customer will also be critical for us, not just capturing opportunities, but managing the risks.
Then the last area is obviously the new products which we're offering, which traditionally have not been. Ever since we took Robinsons Bank, we have motorcycle loans, which was totally non-existent for us in 2023. It started 2024. That's a very different model because we work very closely with our shareholder who runs the dealership, so there's quite good synergy there.
We're not doing it with all dealers, we're just doing it with dealers of our shareholder. We also have grown a business in teachers loans. Today that book is PHP 16 billion. When we took over Robinsons Bank, I think that was PHP 4 billion, right? In two years the secret with teachers loans is really distribution.
Today, whereas Robinsons Bank was only doing it through Legazpi Savings, which very limited reach, today we're distributing teachers loans across the country through our 800 branches, plus even some of the BanKo branches.
Finally, cannot let it go unnoticed the success we've had in our business bank, the SME book, which four years ago was a PHP 16 billion book, and last year ended at PHP 64 billion. That one is a great success story because there we've used data first to identify the businesses that can qualify, just looking up by their cash that goes through our accounts.
Secondly, we actually turned it around and looked at individual accounts, and looked at their data, and identified them as actually SMEs banking with us as individuals, and turned them into SME clients. That's the secret for growth. These, just these three products alone can contribute a significant share to the growth of our consumer.
Thank you, TG. We have a question from Aakash Rawat from UBS. Aakash, you are unmuted. Please go ahead and ask your question.
Great. Thank you very much for taking my questions. Actually, the first one is, TG talked about the environment, which is not looking very positive, strong demand-wise. I'm just wondering what drove the very strong loan momentum in the last quarter of 2025? Is it a few chunky loans from some corporates, any particular sectors? Are we seeing that momentum in 2026 year to date? That's the first question.
Let me get this. You're asking if we can provide any color on the strong Q4 loan growth, right?
Yes.
Luis, any big ones on the corporate side?
For the Q4, it is quite clear and it is very public that the one that drove loan growth was really power.
The projects that were supposed to be completed in 2025 were mostly completed in 2025, despite the macro issues that we were experiencing. This was really the growth that drove the Q4.
Now, will this momentum continue in 2026? Unlikely during the first half, but you still see a good flow of CapEx and projects. That remains significantly present. But it was really purely on a timing and opportunistic basis.
Okay. Got it. Thank you. The second one is, what is the loan exposure to the BPO industry? Are you seeing any change in the demand outlook there, or is it broadly stable over the last 12-18 months? When these companies set up their facilities in Philippines, do they borrow from the local banks or majority of the funding comes from the parent?
Okay. For the BPO, our exposure is mostly on a working capital short-term basis, and we service the flows. Basically, on the loan side, it's very limited in terms of the portfolio. I don't think it's generating even close to 2%, but I can check on that. Generally, the borrowing is from the parent.
The working capital loans is 2% of the loan book. Is that correct?
In an outstanding, that's correct.
Okay. Got it. Thank you. The last one is just on your thoughts on RRR. Do you think we see any cuts this year or not?
Frankly, Aakash, I don't think there'll be any this year.
Okay. Short and sweet. Thank you, TG.
I would like some, but I don't think he'll give it to us this year.
Thank you. Thank you. That's all my questions.
Okay. Thank you. Eric, there's actually a question from Julian Rojas from Philippine Equity Partners. He's asking for our OpEx growth outlook for 2026 and our view on CIR for 2026.
OpEx loan growth, I think we'll continue to try and keep that in check. I think in 2025, we were able to keep that a bit tighter than it had been in the previous years, and we'll look to kind of replicate that performance for 2026, which means that the CIR will depend on revenue growth. Of course, the less revenue grows, the more we're going to force the tightness on the cost-income ratio.
We saw actually a very strong improvement in cost-income ratio in 2025. I think that will not necessarily be. Maybe a chance to try and replicate that in 2026. We'll try to keep to at least that cost-income ratio, at least maintain.
I always be pushing for tightening up in that area.
Thanks, Eric. Before we proceed, any questions from those in the audience?
If none, this is actually a two-part question. I think I can pass it to Dino then to Eric. With regard to our shift towards bond funding, could you just kind of describe the benefits of going to the bond market versus paying for top rate TDs? Maybe you can talk about some of the incentives that come along with that or the other benefits.
Then what's our view on, in terms of incremental issuance in 2026?
The intermediation costs on bonds is much less, particularly on the reserve side, if the issuance is ESG-themed. The reserve requirement on such issuances is zero, compared to 5% for regular time deposit. That's a huge advantage already for bond issuances. Apart from that, these are long-term, usually, though, so more steady than regular time deposits.
What are the prospects for this year? Well, we just issued our new bonds, SIGLA bonds. We may go back. I think we'll probably go back to the Peso bond market as well as the US dollar bond market, later this year. Yeah, I think I.
Thank you, Dino.
Actually, yeah, Danilo Picache was the one who asked the question, Danielo of AB Capital Securities. He has the second part of his question is on NIMs, wanted to be reminded again of the NIM sensitivity for 25 basis point BSP cut and what's the what lift do we get from a shift in mix towards non-institutional loans?
Same as the NIM sensitivity, same as we've said over the last few years. We're looking at per 25 basis point cut in policy rates, approximately 4 basis points of NIM movement after 1 year. No change from the previous years.
Thank you, Eric. We also have a question from Daniella Hernandez of IFC. She's asking which segments will be driving the consumer loan growth or the non-institutional loan growth.
Yeah, I think
More or less, we expect generally those that are strong, those that were strong this year, which is most of them, that they will continue to be strong. The trends remain essentially the same, right? Maria Cristina Go, in case you want to add.
Yeah. We're still very optimistic on the growth of the consumer loans. Primarily driven by unsecured lending, which would comprise of credit cards, personal loans, microfinance, SME loans. Of course, we still see loan growth coming out of our secured mortgage and auto loans. Probably more tepid on mortgage, as TG mentioned earlier.
We are already seeing that the turnovers of housing projects four years ago has contracted coming from COVID-19. On the vehicle sales, we're also seeing some softness there. We have been bucking the trend, which means that all our lending programs and our focus initiatives to drive faster and more affordable loans are coming into fruition. We're
We continue to look at defying the trends in both mortgage and auto. That's why we still are continuing on our guidance of a 20% mix or growth.
Okay. Go ahead, TG.
I just want to add to what Dino was saying, bonds. I'm like one of the biggest guys who keeps on forcing Dino to try to look at more bonds. Not only is there an advantage in the reserve requirement if they're green or blue, but the fact that there's no deposit insurance save some. The fact that if you do a bond over a year, the effective BSP cost is significantly lower.
The fact that if you do a bond, it's better for your LCR ratios, which allows you to be more nimble on your lending. So much more advantages to doing a bond than the typical deposit. Deposits we're competing with our friends across the street every day. Some days there's illogical pricing.
Whereas bonds, you can manage it very, very well, and over time you fix your funding. I'm a big believer in funding with bonds. Dino, please.
Go ahead. Okay. Are there any more questions from the audience? Gilbert, go ahead.
Thank you. Can we say operating expenses of 10% increase is a new normal annually? It's only a target. The 10% is the budget. Thank you.
Okay, thank you, Gilbert. Anyone else from the audience? Okay, go ahead, Dia.
Sorry, can I follow up on that? Any scope to lower, go lower than 10%? I know you're potentially rationalizing some branches still, tech expense as well, and so on.
Dia, it's really. I mean, you have to set a budget, right? You set a budget 'cause you need to plan on what you'll spend at the start of the year. A lot of that is manpower, right? So that one more or less we can fix. Then the next one is premises. That one we can fix. The premises is growing because we're depreciating our build-out within the renovation of the branches.
We certainly want to transform the role of the branches more from the transactional. You have heard me say this many times, right? We need to bring them into the phygital world so that we can sell. That's driving the expense in what we call premises. Then there's technology. Technology is something we have invested because we had that tech depth.
I think in 2022 it rose 23%, in 2023 it rose 24%, in 2024 it rose I think only 14 or 15, and last year it was only 12 or something. I think we're beginning to get our tech spend under get it to be normalized.
This year we are transitioning out of a major vendor on managed services, into a new vendor and another global vendor, where we think we'll see savings of about 30%-40% on that. We intend to do that more and more with some of our major tech vendors. There's a whole process there. Finally, the last component is like marketing costs, which are really driven by. A lot of that is variable, right?
We spend because it generates revenues, and as long as there's a marginal lift in the revenues from spend, we're willing to do that. I don't think you should be very focused on what's the growth in the OpEx spend, but really is it driving also? What's it a percent to your revenues? Because we do have a lot of what we call variable. For example, the rewards we do, right? The points we offer, the rewards, the commissions we offer. That's all variable.
Okay. Very clear. Can I ask one question on wealth? Just on this year, you've been mentioning PHP 1.9 trillion in AUM. Just want to understand how much is the growth and how much is net new money versus portfolio growth. Going forward, what are your thoughts on the outlook? Thank you.
Dia, for 2025, I think it's about 19% in terms of AUM growth. Net new money would account for bulk of that. The one is net new money, the other one is the return on the portfolios. Depending on the portfolio, it could range between maybe 5%-6% for conservative and maybe for some of our products, as much as 30%, for growth products. But in large part, 19% is net new money.
Thank you, Tere. Any more questions from the audience? Go ahead.
Hi. Just one question on the consumer loans, particularly on credit cards. Can you share with us the mix between discretionary spending and non-discretionary spending in 2025, and how does it differ in 2024?
We look at it as essential spending and discretionary spending. For 2024, beginning 2024, we really see a lot more essential spending, basic necessities, basic needs. There are certain.
There are specific categories within the discretionary spending that are outpacing essential, like travel for certain segments. It's difficult to answer as a whole portfolio because we really do segments across the portfolio and not just one whole. Essential obviously is something that has been growing for the past couple of years. Definitely in the discretionary spending, we see pockets where travels are more higher than essential and, higher end dining can also be, higher than essential in certain segments.
Can you give us an idea on like percentage points, how they increased year-on-year?
Retail spending is increasing about 21% per annum. That's where the essentials and the discretionary spending are large.
Thank you.
Okay. Thank you.
Congratulations on the great set of results. For Tere, I guess on BPI Wealth, the 19% growth in net new money, how is that in perspective historically? Is that above your average growth in net new money? Maybe you can give us color what's driving that 19% growth, how BPI sets itself apart from a lot of other banks that want to grow the wealth segment nowadays. I think everybody wants to grow the wealth segment. Thank you.
In terms of Gino, in terms of the three sub-segments within wealth, we look at private wealth, we look at personal wealth, and then we look at institutional. As mentioned by Eric earlier, the highest growing, the highest growth in terms of those across those three segments was personal wealth, and that's really because of rising affluence. I think it grew almost 25%.
Then almost equally, about 16%-17% was the growth we saw in private wealth and institutional. How does that compare versus. In the last three years, we've grown at about that clip, maybe 15%-18%. And if you look at our chart in terms of AUM over the past five years, we have shown a significant increase in our market share.
Just last year alone, I think it was around 30 basis points. We only have up to September. It's been really encouraging. It's a function of the market because we're seeing really a lot of shift towards wealth products. At the same time, this whole rising affluence will show faster growth, especially on the retail as well as the mass affluent and even the high net worth, given the growing sophistication. We're still quite positive towards for 2026 and beyond.
Thank you, Tere. We have a question that was put in by Chanki Hong of JP Morgan. He mentioned that, I mean, he did hear a few times that segments of younger consumers with income below about PHP 40,000 are driving higher NPLs in auto, personal, and credit cards. Generally, how much do these customer segments account for a lot of the growth? If you scale back on these consumer segments, will the growth outlook for these loans be brought down?
Maybe I can answer that, Changki. We have seen the growth of the younger consumers, the appetite for credit to really be high potential. That's why we continue to have lending programs to be able to test the ability of these segments to manage their credit.
A lot of our lending programs are really around the lower income, as I mentioned earlier, as well as the younger segment, because naturally, if you're younger then you naturally have lower income as well. They've contributed to the NPL formation. We actually expected that, primarily because they're new to credit and usually it takes time before they get seasoned.
Now, what we're trying to do is, as we tighten the parameters, increase the required credit score, increase the required income level, we also see opportunities in the higher, quality, segments.
That's what we are trying to unlock. Peeling the onion further through data, looking at opportunities to cross-sell and be able to provide additional, loan and credit to those that are existing-to-bank, and therefore with, bank transactions that we can underwrite, but also to others who are outside of the bank. They're new-to-bank but are existing-to-credit. These are the opportunities that we're looking at, unlocking the potential of credit scores such as TransUnion and CIBI, so that we can capture opportunities that may not necessarily be just within the books of BPI.
Let's just be very clear. There is nothing wrong with NPL as long as you're pricing it properly. Right? I think that's the beauty of the diverse products we have. Now, certainly there is an interest rate cap on cards, so that one we're a little bit limited as to how far downmarket we can go. That's why we have personal loans where we can do smaller ticket items, price it properly.
Clearly, we have, like, SME, we can price based on the risk of the particular SME. We can price anywhere from 14% to 27% depending on the risk. Certainly when you face what I would call the traditional consumer products like mortgage and auto, there you're a little limited because of the competition, right?
Some of my friends have been burned, right, by not understanding. That's where I think BPI understands the market better than anyone else. Yes, we can go downmarket there, but it's gotta be priced properly, and we're prepared to walk away when the pricing is wrong for the kind of risk that people are offering.
I will also add, we talk a lot about underwriting, but we don't talk enough about recoveries and collections.
That's really another big opportunity for us because we're able to use data, and able to use our branches and our extensive networks to be able to really recover and improve our collections. We monitor our curing rates and our flow rates very, very intently, and that's how we're able to do that. That's why we have also very good LGDs, particularly in our collateralized or secured loans.
Thank you, Jane Lee. Thank you, TG. Just wanted to check again, any more questions from the audience? Okay. We've actually gone through our questions. Thank you everyone who's put up some questions. again we'd like to highlight BPI is always welcome.
We always welcome your feedback and likewise take them into careful consideration. Before we end the call, maybe call on TG for some final thoughts.
Thank you, Haj, and thanks again to everyone for participating in this call. Thanks to my colleagues here for joining me and being more transparent with our investors. To be frank, 2025 actually ended better than we had thought when we were looking at the way we thought the year would end back in September and October. We're a little more bearish on what the results came out.
We're very pleased with the final results. January has started actually not so bad. It gives me hope that 2026 will be a decent year. Now, my gut feel here is that yes, I've called it the malaise of what sentiment of the economy, but guys, it's really about confidence. There's no structure. We don't have a war.
We don't have. It's purely sentiment driven. I think that sentiment can turn very quickly, and therefore, as an organization, we're being prepared for that. We do have our plans for the year.
We do want to be more capital efficient this year, so we have hinted at increasing dividends and a higher dividend payout because we think we have sufficient capital, and we want to maintain the return on equity that's closer to 15 than the 14.5 that we have. With that message, I think let's look forward to 2026. Again, thanks to everyone for participating today. Thanks, Haj, for being a great host. We'll see you in one quarter. Sorry. The ESM.
Yes. Thank you, TG. Thank you, TG, Eric, and the rest of the BPI senior management team.
Ladies and gentlemen, this concludes today's earnings call. Thank you again for your participation.
To those likewise joining online, you may now disconnect. For those on site, please do join us for some refreshments. Thank you.