Bank of the Philippine Islands (BPI) is deliberately changing the composition of a loan book historically dominated by large institutional customers, as it seeks faster growth in consumer and small and medium-sized enterprise (SME) banking without giving up pricing and credit discipline. Institutional customers accounted for about 80% of BPI’s loan book before 2021, according to president and CEO Jose Teodoro “TG” Limcaoco. Today, they account for about 70%. Consumer and SME lending has consequently increased from about 20% to more than 30% of the portfolio, even as institutional lending itself continues to grow.

The shift changes more than BPI’s sources of growth. Moving further into consumer and SME lending also changes the risk economics of a universal bank whose lending has historically been weighted towards institutional customers. In the first half of 2026, BPI’s loans increased 12.4% year-on-year to PHP 2.7 trillion (about $46.8 billion), with SME loans growing 74.5%, credit cards 28.9% and personal loans 21.4%. Provisions increased 84% to PHP 13.3 billion (about $230 million) as expected credit losses rose amid a weaker macroeconomic outlook, while net income was broadly flat at PHP 32.8 billion (about $568 million).

Limcaoco acknowledged that moving further into consumer lending means accepting higher credit costs than those associated with traditional commercial banking. The discipline, he said, is to price for that risk while controlling funding costs and protecting margins.

The Robinsons Bank merger also contributed to this diversification. Limcaoco said the transaction increased BPI’s size by only about 6%, while bringing customers, lending businesses, technology and a relationship with the Gokongwei Group ecosystem. The question is whether BPI can translate a broader franchise and faster-growing loan segments into sustainable risk-adjusted growth as the operating environment becomes less accommodating.

BPI shifts the balance of its loan book

BPI’s diversification away from its historical concentration in institutional lending predates the completion of the Robinsons Bank integration. “What we’ve done is we’ve decided that we want to focus BPI on consumer and broaden our customer base,” Limcaoco said.

The shift is relative rather than absolute. Limcaoco said BPI’s institutional loan book has continued to grow at about 13% to 14% over the past four years, but consumer and SME businesses have expanded faster. The result is a gradual change in the composition of the balance sheet rather than a retreat from institutional banking.

The strategy gives BPI greater exposure to segments with different growth and yield characteristics, but also different credit behaviour. Limcaoco said a traditional commercial bank expanding further into consumer lending needs to be prepared for higher provisions and credit costs and ensure that these are reflected in loan pricing. That makes customer selection increasingly important.

In SME banking, BPI is using account behaviour to identify customers who may be operating businesses even though they initially opened personal accounts. Limcaoco said many entrepreneurs begin their relationship with the bank as individuals, meaning conventional customer classifications can fail to identify potential SME borrowers. Transactional patterns can provide additional signals, allowing BPI to identify customers who may qualify for business credit and other SME services.

Limcaoco also described a willingness to experiment with lending programmes while stopping those that do not produce the expected results. The approach places greater weight on the bank’s ability to identify risk and adjust quickly as it expands into customer segments with less predictable credit behaviour than its traditional institutional base.

Robinsons merger extends beyond scale

The merger with Robinsons Bank fits into this broader diversification. The transaction became legally effective in January 2024, with BPI as the surviving institution, and the final major systems integration was completed in 2026. Robinsons Bank had been controlled by companies within the Gokongwei Group, while BPI is closely associated with the Ayala Group. BPI identified an expanded customer and deposit base, a more diversified loan portfolio and opportunities across the Gokongwei business ecosystem among the strategic rationales when the transaction was proposed.

Limcaoco characterised the merger as strategic despite increasing BPI’s size by only about 6%. “I think that was a very strategic merger on our part, even though it only allowed the bank to grow 6%,” he said. He pointed to the Gokongwei Group relationship, customer segments, lending businesses, technology and people that came with Robinsons Bank.

Robinsons Bank had a greater presence among Filipino-Chinese and middle-market customers and lending businesses in areas including motorcycle and teachers’ loans. Limcaoco said BPI has since quadrupled the teachers’ loan portfolio it inherited and has used its larger capital base and distribution network to scale some of those businesses.

The transaction also created opportunities for BPI to pursue business across the Gokongwei Group ecosystem, an objective BPI identified when the merger was proposed. The group has interests spanning sectors including food manufacturing, property, aviation and retail. Limcaoco also pointed to technology and personnel acquired through Robinsons Bank.

How much value BPI ultimately derives from these relationships and capabilities will depend on how effectively it converts them into additional business. The merger expanded what BPI can pursue; the economic returns from those opportunities still depend on execution.

BPI tests the economics of wider access

BPI is also trying to broaden its customer funnel through digital services and physical distribution. From July 2026, the bank permanently removed person-to-person InstaPay and PESONet transfer fees across several of its digital channels. It has also expanded agency banking to more than 7,000 partner stores, including more than 1,300 locations where customers can make deposits and withdrawals.

For Limcaoco, the decision to give up some transaction-fee income reflects a longer-term view of customer economics. He said bringing more customers into BPI’s ecosystem gives the bank an opportunity to deepen those relationships through deposits, payments, insurance, lending and other services. More customer activity also generates data that can help the bank understand financial behaviour and identify additional needs. “It pays off in the long term,” he said.

Whether that trade-off produces sufficient additional lifetime value to compensate for the forgone fees will depend on how successfully BPI converts greater activity into broader relationships. Digital onboarding is another part of the acquisition strategy. Limcaoco said BPI has introduced account opening linked to the Philippine Statistics Authority’s national identity database, using facial recognition and customer information for verification. About 60 out of every 100 account-opening attempts now successfully complete the process, he said.

But wider digital distribution has not removed the role of physical branches. Limcaoco described branches as a physical embodiment of trust and increasingly as locations for advice, sales and financial education rather than routine transactions. Customers may want human reassurance when first using unfamiliar financial products before subsequently conducting those transactions digitally. “We see branches as a place of learning,” he said.

The proposition is therefore broader than channel migration. BPI is seeking to use digital channels for scale and convenience while retaining physical distribution where human interaction can support more complex or unfamiliar financial decisions.

Growth becomes more selective as credit risks rise

Technology spending sits within the same economic equation. BPI’s operating expenses increased 13.8% in the first half of 2026 to PHP 48.6 billion (about $842 million), partly reflecting higher manpower and technology costs.

Limcaoco argued against assessing every technology investment through an immediate, separately identifiable return. He compared technology infrastructure with branches and head offices: capacity that a bank needs to operate and compete, even where the return cannot always be isolated to a single investment. The financial discipline, he said, is ultimately to grow revenue faster than expenses.

BPI also tracks the economics of digitally active customers, defined by the bank as those conducting more than half of their transactions through digital platforms. Limcaoco said these customers transact more frequently and generate more revenue at lower cost than non-digital customers.

Artificial intelligence (AI) is becoming part of that technology investment rather than a separate strategy. BPI currently uses AI in areas including basic customer-service enquiries and employee productivity. Limcaoco said the bank is also considering agentic AI for underwriting. At the same time, it is examining the economics of relying on external AI services and alternatives that could operate against the bank’s own knowledge base. The discussion remains exploratory rather than a commitment to a particular architecture.

The more immediate challenge is credit. Limcaoco said BPI tightened credit standards following the escalation of the Middle East conflict and has stepped up collections, including contacting customers earlier even before payments become due. The bank intends to continue lending through the economic cycle but is becoming more selective about where it does so.

Transactional behaviour is increasingly being used as an early-warning indicator. Limcaoco said BPI examines how customers use personal loans and credit lines. Borrowing increasingly used for essentials can signal financial pressure, while discretionary spending may indicate greater household resilience. Changes in repayment behaviour can provide another signal: a customer moving from paying several days early to paying on the due date or later may indicate deterioration before outright delinquency emerges. For larger corporate customers, the bank supplements transactional data with direct discussions about capital expenditure and working-capital plans to assess business confidence.

These signals become more important as BPI changes its business mix. A larger consumer and SME portfolio offers different sources of growth from institutional banking, but also increases the importance of underwriting, collections, behavioural data and risk-based pricing.

Limcaoco said customer experience remains an important differentiator in a market where banks can offer broadly similar products. Over the longer term, he sees room for non-institutional lending to increase from about 30% of BPI’s portfolio today to 32% or 35% over the next five years. The direction would further reduce BPI’s historical concentration in institutional banking, but it would also increase the importance of managing the different credit and operating economics that accompany consumer and SME growth.

BPI is therefore becoming a more diversified universal bank rather than simply a larger institution. The Robinsons combination has expanded the range of customers and businesses it can pursue, while technology and wider distribution are changing how those customers are acquired and served. Greater scale gives BPI more options, but whether those options translate into sustainable economics will depend on how selectively the bank uses them and whether faster growth continues to compensate for the higher risks and costs associated with the changing mix.

For BPI, the next test is not whether it can become larger, but whether a more diversified universal bank can generate sustainable risk-adjusted growth.