Philippine Stock Market Research

December 27, 2016

Philippine Banking Sector

Our Special Report this week is about the Philippine banking sector.  With interest rates seen to rise stemming from the US interest rate hike this December and the series of hikes seen in 2017, banks are seen to be the main beneficiaries of this.  Yields and margins are seen to improve from this.  The Philippine economy continues to be robust, and there is an observed acceleration in banks’ total loans, assets and deposits from 2010 to 2012.  Real estate loans also took the top spot in 10M16 as banks dipped into more risky loans with higher rewards as the economy grew.  This resulted to a slight increase in NPLs (Non-Performing Loans) in 10M16, but they are still well below manageable levels.

We also identified the best and worst banking stocks from our eight-bank stocks coverage.  The worst are easily identified.  If a bank’s total assets and deposits are contracting while others are expanding, then that bank is red-flagged.  Another bank given the biggest fine ever by the BSP of PHP1 bn for its involvement in the biggest heist as of this time is also easily red-flagged.

The best banks have huge discounts to their valuations and have earning asset drivers that can elevate their future earnings.


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