There are no signs of slowing down yet for the country’s biggest banks.
Take a look at their first-quarter earnings for the year: BDO Unibank Inc. (BDO) reported PHP 18.5 billion, Bank of the Philippine Islands (BPI) clocked in at PHP 15.26 billion, and Metrobank (MBT) registered PHP 12 billion.
Despite a high interest rate environment, all three banks experienced growth in their loan portfolios. While net interest margins (NIMs) remained elevated, all three guided for NIMs to remain steady for the rest of the year.
Asset quality has been reasonably stable, with BPI notably experiencing an accelerated non-performing loan ratio due to a strategic focus on growing high-yield segments of their loan portfolio. In terms of stock performance, MBT has seen the strongest appreciation year-to-date.
As shown in the table above, corporate earnings in the first half of 2022 have validated our views, with most downtrodden sectors posting above-average growth.
Share prices were quick to reflect better optimism as revenues trek back to pre-pandemic levels and bottom line earnings ultimately grow by 27% for the first half. The Philippine Stock Exchange index (PSEi) returned 4.2% in August as earnings were coming out.
Strong global headwinds (sustained heightened inflation, hawkish global monetary policy, weakening peso) has capped any further moves higher, as the market trades 7.8% lower for the year and especially in US dollar terms.
Nonetheless, we think that the underlying fundamentals for Philippine companies have shown resilience and warrants more constructive positioning in client portfolios.