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Bond: BPIPM 5 30
Bank of Philippine Islands
- Sector: Financial Services
- Sub Sector: Banks
- Country: Philippines
- Bond: BPIPM 5 30
- Indicative Yield-to-Maturity (YTM): 4.41%
- Credit Rating : BBB
Detailed Information
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Fundamental View
AS OF 14 May 2025- Bank of the Philippine Islands (BPI) is the 3rd largest bank in the Philippines by assets.
- 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 strong and improved profitability, and comfortable liquidity. Capital management however has become less conservative, and while asset quality is relatively well managed, we are keeping an eye on strong growth in the non-wholesale book.
Business Description
AS OF 14 May 2025-
- 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.
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- 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 71% of its loan book outstanding to corporates, and the balance to MSME and retail as of 1Q25. The bank's target is to grow the MSME and retail segment to a 30% share of loans.
Risk & Catalysts
AS OF 14 May 2025- Any rating downgrade of the Philippine sovereign would have a negative impact on BPI.
- Direct impact from US tariffs is limited given that the Philippines is not a major goods exporter, but there will be second order effects from a slowdown in regional and global growth. Loan growth will continue to be retail/MSME driven in FY25 particularly as some businesses put borrowing plans on hold.
- BPI’s strong focus on unsecured retail and MSME growth has put pressure on asset quality, and provision reserves have also been pared down. We see asset quality risks, but BPI’s large corporates-focused book (71% of total loans) provide comfort and provisioning capacity is strong.
- We also expect increased margin pressure with more rate cuts anticipated from the BSP now in 2025 to support growth. However, management expects to maintain a flattish FY25 NIM, supported by RRR reductions and a continued pivot towards better yielding retail/MSME.
Key Metric
AS OF 14 May 2025| PHP mn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| PPP ROA | 2.01% | 2.41% | 2.52% | 2.78% | 2.96% |
| Reported ROA (Cumulative) | 1.10% | 1.59% | 1.93% | 1.98% | 2.05% |
| Reported ROE (Cumulative) | 8.4% | 13.1% | 15.4% | 15.1% | 15.4% |
| Net Interest Margin | 3.30% | 3.59% | 4.09% | 4.31% | 4.49% |
| CET1 Ratio | 15.8% | 15.1% | 15.3% | 13.9% | 14.7% |
| Total Equity/Total Assets | 12.1% | 12.2% | 12.4% | 13.0% | 13.7% |
| NPL Ratio | 2.49% | 1.76% | 1.84% | 2.13% | 2.26% |
| Provisions/Loans | 0.91% | 0.58% | 0.22% | 0.32% | 0.53% |
| Liquidity Coverage Ratio | 221% | 195% | 207% | 159% | n/m |
| Net Stable Funding Ratio | 155% | 149% | 154% | 146% | n/m |
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Our View
AS OF 21 May 2025Despite the heightened risk associated with growth in non-wholesale loans, BPI continues to demonstrate strong liquidity, a well-managed corporate loan portfolio (which accounts for 73% of total loans), and a solid underwriting track record. With adequate provisioning and a robust capital position, the bank remains a stable and dependable option for bond investors.
Recommendation Reviewed: May 21, 2025
Recommendation Changed: May 21, 2025
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