Read this content. Log in or sign up.
If you are an investor with us, log in first to your Metrobank Wealth Manager account.
If you are not yet a client, we can help you by clicking the SIGN UP button.
Fundamental View
AS OF 13 May 2024Bank of the Philippine Islands (BPI), the 3rd largest bank in the Philippines by assets, is rated Baa2(stable)/BBB+(stable)/ BBB-(stable).
We view the bank as too big to fail given its systemic importance in the country. There is also a strong probability of support from the government in addition to its main shareholder, the Ayala Corporation if needed.
BPI has a long history, and we view it as a fundamentally sound bank with prudent capitalization, well-managed asset quality, stable profitability, and comfortable liquidity.
Business Description
AS OF 13 May 2024- The history of the Bank of the Philippine Islands traces back to 1851. It is the oldest bank in the Philippines and South East Asia. It was first listed on the Philippine Stock Exchange in 1971, and became a universal bank in 1982.
- Ayala Corporation, one of the biggest conglomerates in the country, became BPI's dominant shareholder in 1969. Ayala Corp still holds a 49% stake in the bank.
- BPI has been acquisitive across the years. It merged with Far East Bank and Trust Company and acquired Ayala Insurance Holdings Corp in 2000. It acquired DBS Bank Philippines in 2001 and Prudential Bank Philippines in 2005. DBS was a shareholder of BPI but exited its position in 2013. More recently in January 2024, it completed the acquisition of the Gokongwei conglomerate's Robinsons Bank.
- The bank is predominantly a corporate bank with 74% of its loan book outstanding to corporates, 1% to SMEs and 25% to retail as of 1Q24. The longer term target is to grow the retail and SME segment to a 30% share of loans.
Risk & Catalysts
AS OF 13 May 2024Any downgrade of the Philippine sovereign ratings (Baa2/ BBB+/ BBB) would have a negative impact on BPI’s credit ratings.
BPI’s recent focus on unsecured retail growth to support the NIM when the interest rate cycle turns has put pressure on asset quality, but within acceptable levels thus far. Provisioning capacity is strong, and the predominantly large corporate-focused loan book (~74% of total loans) is a key credit strength.
The acquisition of Robinsons Bank was completed on 1 January 2024 has weakened BPI’s NPL cover and overall asset quality metrics but to a manageable extent. It opens BPI up to new customer segments such as teachers and motorcycle loans, although the current footprint is small.
The rate cutting cycle is likely to commence later in 2H24 which will have a net negative impact on the NIM, but the effect will largely come through only in 2025.
Key Metrics
AS OF 13 May 2024PHP mn | FY20 | FY21 | FY22 | FY23 | 1Q24 |
---|---|---|---|---|---|
PPP ROA | 2.42% | 2.01% | 2.41% | 2.52% | 2.89% |
Reported ROA (Cumulative) | 0.98% | 1.10% | 1.59% | 1.93% | 2.02% |
Reported ROE (Cumulative) | 7.7% | 8.4% | 13.1% | 15.4% | 15.7% |
Net Interest Margin | 3.49% | 3.30% | 3.59% | 4.09% | 4.19% |
CET1 Ratio | 16.2% | 15.8% | 15.1% | 15.3% | 14.7% |
Total Equity/Total Assets | 12.5% | 12.1% | 12.2% | 12.4% | 13.1% |
NPL Ratio | 2.68% | 2.49% | 1.76% | 1.84% | 2.12% |
Provisions/Loans | 1.94% | 0.91% | 0.58% | 0.22% | 0.32% |
Liquidity Coverage Ratio | 232% | 221% | 195% | 207% | n/m |
Net Stable Funding Ratio | 154% | 155% | 149% | 154% | n/m |
CreditSights View
AS OF 13 May 2024BPI is a fundamentally sound bank. Its traditionally conservative approach has led to a loss of loan market share in the past, as well as a lower NIM than BDO and MBT. However, it took a well-balanced approach towards growth during and post-pandemic, and improved its NIM and profitability well partly by shifting the loan mix towards retail. It is continuing with digital investments which have driven growth and efficiency. High interest rates and brisk growth in unsecured retail present asset quality risks, and the acquisition of Robinsons Bank has weakened the NPL cover and overall asset quality metrics, but within acceptable levels while provisioning capacity has strengthened. We like BPI for its large corporate-focused book, comfortable capital and strong provisioning capacity.
Recommendation Reviewed: May 13, 2024
Recommendation Changed: August 19, 2022