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Fundamental View
AS OF 27 May 2025Nissan unveiled their second strategic plan in as many years, with the Re: Nissan Recovery Plan under new CEO Ivan Espinosa focused on sweeping changes to the company’s manufacturing footprint and cost structure. We believe the plan comes with a high degree of execution risk considering execution has been a major organizational weakness in recent years. Lacking in the recovery plan, in our view, was updated details of its hybrid vehicle development and introduction targets, which would address a hole in its product lineup in a fast-growing global segment. While we are hopeful the Re: Nissan Recovery Plan succeeds, and we will be rooting for management to flawlessly execute the plan, we view currently view the plan as a “show me” story until we gain confidence in their ability to execute.
Business Description
AS OF 27 May 2025- Nissan, with headquarters in Yokohama, Japan, is a leading global automotive manufacturer with a market presence in many countries around the globe. The company’s growth investments are focused primarily on Japan, North America, and China, core markets with large profit pools in which Nissan has a meaningful market share. The company’s business in China is conducted through a joint venture with Dongfeng Motor Corporation.
- Nissan’s Sales Financing segment supports the sale of its vehicles by providing financing solutions to its customers and dealers. To enhance their creditworthiness, Nissan maintains keepwell (support) agreements with its wholly owned financial subsidiaries including Nissan Motor Acceptance Corporation (NMAC) in the United States and Nissan Financial Services (NFS) in Japan.
- The Renault-Nissan-Mitsubishi Alliance was established in 1999 to enhance member company scale in product development and raw material purchasing. The alliance includes equity participation, which led to Nissan holding ownership stakes in Renault (15% non-voting) and Mitsubishi (34%) and Renault holding an ownership stake in Nissan (43%). The Alliance’s automobile production volume is the third largest globally behind Toyota and Volkswagen.
Risk & Catalysts
AS OF 27 May 2025Management provided FY25 guidance for production volumes, retail sales, and consolidated operating profit, noting the guidance excludes tariff impacts. However, it noted its guidance for operating profit, net income, and automotive free cash flow is preliminary owing to uncertainty related to the potential impact of tariffs and additional restructuring costs that are currently being assessed. More broadly, the company is viewing FY25 as a year of transition that will set the stage for achieving positive automotive operating profit and free cash flow by FY26.
The company expects to produce and sell 3% fewer vehicles in FY25 than it did in FY24. The retail sales decline expectation is driven by lower projected sales in China, which management expects to decline by about 18%. Global production volume is expected to decline to 3.0 mn units to manage dealer inventories based on the company’s lower retail sales outlook. The company expects revenue to decrease 1% in FY25 as lower volumes are partially offset by improved sales incentive management and favorable pricing related to new model launches in 2H25.
Key Metric
AS OF 27 May 2025| JPY bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Revenue | 6,843 | 7,393 | 9,573 | 11,524 | 11,371 |
| EBIT | (471) | (42) | 242 | 409 | (54) |
| EBIT Margin | (7%) | (1%) | 3% | 4% | (0%) |
| EBITDA | (201) | 247 | 559 | 760 | 309 |
| EBITDA Margin | (2.9%) | 3.3% | 5.8% | 6.6% | 2.7% |
| Total Liquidity | 4,096 | 3,601 | 3,658 | 4,196 | 4,272 |
| Net Debt | (636) | (728) | (1,213) | (1,546) | (1,499) |
| Total Debt | 1,260 | 973 | 687 | 468 | 661 |
| Gross Leverage | n/m | 3.9x | 1.2x | 0.6x | 2.1x |
| Net Leverage | 3.2x | -2.9x | -2.2x | -2.0x | -4.8x |
CreditSight View Comment
AS OF 05 Jun 2025Our Underperform recommendation on Nissan Motor and Nissan Motor Acceptance Corporation (NMAC) notes is based on our view the notes are subject to downside risk from the recently enacted US auto import tariffs that could thwart its profit improvement initiatives in teh US and weigh on its credit rating. The major risk to our underperform recommendation is a potential partnership with Foxconn, KKR, Tesla, or Honda, the latter of which could lead to expectations for a near-term rating upgrade back to investment grade.
Recommendation Reviewed: June 05, 2025
Recommendation Changed: February 26, 2025
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN
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Fundamental View
AS OF 27 May 2025Toyota’s financial guidance for FY26 reflects expectations for higher vehicle production and wholesales but lower consolidated operating profit. Most of the decline in profit is attributable to currency that is projected to go from a tailwind in FY25 to a material headwind in FY26. The other major profit headwind is tariffs, which we estimate could be a 200 bp automotive EBITDA margin headwind based upon management’s estimates. While significant, we believe the tariff headwind – if realized – would not push its profit margin below the rating agency downgrade triggers. Management noted tariff impacts are difficult to estimate based on ongoing negotiations, including government-to-government dialog between Japan and the US.
Business Description
AS OF 27 May 2025- Toyota Motor Corp. (TMC) engages in the manufacture and sale of motor vehicles and parts. It operates through the following segments: Automotive, Financial Services, and All Other. The Automotive segment designs, manufactures, assembles and sells passenger cars, minivans, trucks, and related vehicle parts and accessories. Toyota is also involved in the development of intelligent transport systems. The Financial Services segment offers purchase or lease financing to Toyota vehicle dealers and customers. It also provides retail leasing through lease contracts purchased by dealers. The company was founded by Kiichiro Toyoda on August 28, 1937, and is headquartered in Toyota, Japan.
- Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary of TMC, oversees the management of Toyota's finance companies worldwide. Toyota Motor Credit Corporation (TMCC) is the company’s principal financial services subsidiary in the United States. Under terms of the credit support agreement between TFSC and TMCC, TFSC agrees to: (1) maintain 100% ownership of TMCC; (2) cause TMCC and its subsidiaries to have a tangible net worth of at least $100,000; (3) make sufficient funds available to TMCC so that it will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper. The terms of the credit support agreement between TMC and TFSC are very similar to the terms of the TFSC and TMCC credit support agreement.
Risk & Catalysts
AS OF 27 May 2025Toyota unveiled FY26 financial guidance that includes a 5% increase in vehicle wholesales and a 1% increase in automotive revenue but a 21% decrease in consolidated operating income. Consolidated vehicle sales are expected to increase by about 5% YoY based on growth in all regions. FY25 consolidated operating income guidance of ¥3.8 tn is 21% lower on a YoY basis, which would represent the second consecutive double-digit decline from its peak ¥5.4 tn consolidated operating income it reported in FY24.
On tariffs, management stated details of tariffs are still in flux, including ongoing government-to-government negotiations between Japan and the US. It indicated the tariffs that have been imposed to date are reflected in its forecast, but noted it is difficult to forecast the future given the fluidity of global trade negotiations. The company has a long-term plan to increase its local supply percentage ratio in the US as part of its business continuity plan. However, it has no immediate plans to change in its US vehicle production or auto parts sourcing plans in the near term owing to uncertainty in country tariffs and the durability of US vehicle and auto parts tariffs.
Key Metric
AS OF 27 May 2025| JPY bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Automotive Revenue | 24,652 | 28,606 | 33,777 | 41,081 | 42,996 |
| EBIT | 1,778 | 2,519 | 2,486 | 4,890 | 4,047 |
| EBIT Margin | 6.5% | 8.0% | 6.7% | 10.8% | 8.4% |
| EBITDA | 2,654 | 3,526 | 3,671 | 6,159 | 5,425 |
| EBITDA Margin | 9.8% | 11.2% | 9.9% | 13.7% | 11.3% |
| Total Liquidity | 11,557 | 15,864 | 10,090 | 12,401 | 11,599 |
| Net Debt | 597 | (1,719) | (2,825) | (4,025) | (3,355) |
| Total Debt | 3,872 | 2,580 | 2,724 | 2,868 | 2,736 |
| Gross Leverage | 1.5x | 0.7x | 0.7x | 0.5x | 0.5x |
| Net Leverage | 0.2x | -0.5x | -0.8x | -0.7x | -0.6x |
CreditSight View Comment
AS OF 05 Jun 2025Our Underperform recommendation on notes of Toyota Motor Co. and Toyota Motor Credit Corporation is based primarily on relative value, although we consider the Toyota bond complex to be a relatively safe haven for long-term investors.
Recommendation Reviewed: June 05, 2025
Recommendation Changed: May 09, 2025
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN
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Fundamental View
AS OF 27 May 2025Virtually all the company’s FY26 profit headwinds stem from currency and tariffs that combined represent a 370 bp consolidated operating profit headwind. The currency headwind is related to the depreciation of emerging market currencies against the US dollar and, in our view, is rarely a consideration in the credit rating decision-making process. The tariff headwind is more concerning, although we note the company’s tariff cost estimates are a worst-case scenario that includes tariffs on parts as the company works to complete the country-of-origin certification process to qualify for the USMCA tariff exemption. Still, we believe the weak guidance and uncertain trade environment may be enough for Moody’s and Fitch to follow S&P’s lead in revising Honda’s outlook to negative.
Business Description
AS OF 27 May 2025- Honda Motor Co., Ltd. engages in the manufacture and sale of automobiles, motorcycles, and power products. It operates through the following segments: Automobile, Motorcycle, Financial Services, and Power Product and Other Businesses. The Automobile segment manufactures and sells automobiles and related accessories. The Motorcycle segment handles all-terrain vehicles, motorcycle business, and related parts. The Financial Services segment provides financial and insurance services. The Power Products and Other Businesses segment offers power products and relevant parts.
- American Honda Finance Corporation (AHFC) is a wholly-owned subsidiary of American Honda Motor Co., Inc. (AHM or the Parent). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Non-controlling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate of AHFC. AHM is a wholly-owned subsidiary and HCI is an indirect wholly-owned subsidiary of Honda Motor Co., Ltd. (HMC). Honda Motor Co. (HMC) maintains Keep Well (support) agreements with its North American finance subsidiaries, AHFC and HCFI. Under the Keep Well agreements, HMC agrees to (1) maintain at least 80% ownership in AHFC and HCFI, (2) ensure AHFC and HCFI maintain a positive net worth, and (3) ensure both AHFC and HCFI have sufficient liquidity to meet their debt payment obligations.
Risk & Catalysts
AS OF 27 May 2025Management unveiled FY26 guidance that represented higher motorcycle wholesales, lower automobile wholesales, and a steep decline in consolidated operating income based on currency and tariff headwinds. Management expects FY26 motorcycle wholesales to increase 4%, with the change compared to FY25 driven primarily by Asia. It expects automobile wholesales in North America to increase 2% YoY; while management currently expects the North America automobile market size to be about the same as last year, it is concerned about the impact of tariffs on total demand.
FY26 revenue is expected to decline by about 6% as price increases related to “improved product values” are expected to be offset by currency headwinds. Management predicts its FY26 consolidated operating margin would be the same as its FY25 margin of 6.2% when adjusted for warranty, currency, and tariff impacts. However, the expected impacts of currency and tariffs are expected to reduce Honda’s consolidated operating income by 59% in FY26, or 370 bp of margin compression to 2.5%. The currency impacts are driven by projected depreciation of emerging market currencies against the US dollar
Key Metric
AS OF 27 May 2025| JPY bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue | 10,908 | 11,967 | 14,167 | 17,434 | 18,509 |
| EBIT | 576 | 741 | 612 | 1,219 | 899 |
| EBIT Margin | 5.3% | 6.2% | 4.3% | 7.0% | 4.9% |
| EBITDA | 1,175 | 1,334 | 1,294 | 1,964 | 1,630 |
| EBITDA Margin | 10.8% | 11.1% | 9.1% | 11.3% | 8.8% |
| Total Liquidity | 3,717 | 4,612 | 4,926 | 6,150 | 5,387 |
| Net Debt | (2,048) | (2,481) | (2,751) | (3,762) | (3,216) |
| Total Debt | 480 | 837 | 803 | 863 | 646 |
| Gross Leverage | 0.4x | 0.6x | 0.6x | 0.4x | 0.4x |
| Net Leverage | -1.7x | -1.9x | -2.1x | -1.9x | -2.0x |
CreditSight View Comment
AS OF 05 Jun 2025We are lowering our recommendation on Honda Motor Co. and American Honda Finance Corporation notes from Market perform to Underperform based on relative value and projected tariff costs that could lead to negative outlook revisions by Moody’s and Fitch, partially offset by tariff risk mitigation strategies that we believe could improve its profit outlook over the intermediate term.
Recommendation Reviewed: June 05, 2025
Recommendation Changed: May 15, 2025
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN
How may we help you?
Search topics about wealth insights and investments.San Miguel Corporation
- Sector: Manufacturing
- Sub Sector: Diversified Conglomerates
- Country: Philippines
- Region: Philippines
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Fundamental View
AS OF 27 May 2025SMC’s FY24 earnings and credit metrics EBITDA improved YoY as we had expected from resilient broad-based demand recovery, lower thermal coal input costs, new project contributions, and good cost control measures.
We are comfortable with SMC’s large diversified operations and dominant market share in key sectors, which could outweigh its persisting high airport and infrastructure capex.
We see low non-call risk for the c.2025 and c.2026 perps in the SMC complex, given SMC’s strong ability and willingness to repay earlier perps at SMC GP, good access to diverse funding channels, and deep reputational concerns upon a non-call.
Business Description
AS OF 27 May 2025- SMC is a massive conglomerate in the Philippines with business interests across six business segments: Food & Beverage (F&B), fuel refining and retailing, power, packaging, infrastructure, and others.
- Its F&B business is operated through San Miguel Food & Beverage, the largest F&B company in the Philippines with three main divisions: Beer and Non-alcoholic Beverage (including beers and juices), Spirits (gin and Chinese wine), and Food (including packaged foods, animal feeds, poultry and fresh meats).
- SMC’s fuel refining and retailing business is operated through Petron Corporation (~68% stake), the largest oil refining and retailing company in the Philippines, and one of the largest in Malaysia. Petron has a total refining capacity of ~268k barrels/day.
- SMC’s power business is operated through SMC Global Power Holdings (SMC GP, 100% stake), one of the largest power generating companies in the Philippines. It maintains a diversified portfolio across coal (62%), natural gas (26%), and renewable energy (12%) sources.
- Through its packaging business, it manufactures glass containers, plastic crates, pellets, bottles and caps, aluminium cans, and other types of packaging products.
- It operates its Infrastructure business through San Miguel Holdings Corp (SMHC), in which it holds a 100% stake. It currently operates ~190 km of toll roads in the country, connecting high-traffic, arterial routes in Luzon.
Risk & Catalysts
AS OF 27 May 2025SMC’s revenues are concentrated in the Philippines (~80%), which poses geographical concentration risk.
SMC incurs significant capex, particularly in its power/energy and infrastructure businesses. In October 2020, SMC began construction of the mega New Manila International Airport (requires ~PHP 750 bn of capex spread over 5-7 years). This could keep SMC’s credit metrics elevated and free cash flows in negative territory.
As a holding company, SMC is reliant on dividend upstreaming from its operating subsidiaries to service its debt, which can be difficult should the operating subsidiaries face cash flow difficulties.
SMC operates in the businesses of thermal power generation and fuel refining, which may be looked at unfavourably by some ESG-focused investors.
Key Metric
AS OF 27 May 2025| PHP bn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 72.3% | 71.6% | 73.0% | 72.0% | 71.0% |
| Net Debt to Book Cap | 58.5% | 60.4% | 61.2% | 60.6% | 58.0% |
| Debt/Total Equity | 261.3% | 251.9% | 269.9% | 256.7% | 244.8% |
| Debt/Total Assets | 69.8% | 68.1% | 68.2% | 68.0% | 68.4% |
| Gross Leverage | 9.1x | 8.4x | 8.3x | 8.2x | 7.9x |
| Net Leverage | 7.4x | 7.1x | 7.0x | 6.9x | 6.5x |
| Interest Coverage | 2.8x | 2.1x | 2.1x | 2.1x | 2.1x |
| EBITDA Margin | 12.2% | 13.8% | 14.0% | 12.5% | 15.6% |
CreditSight View Comment
AS OF 27 May 2025We have a Market perform recommendation on SMC and its sole c.Jul-25 $ perp; we see limited extension risk for SMC’s perp, yet we don’t see much price upside from current levels. SMC’s c.Jul-2025 trades close to par and fairly to Ayala Corp’s c.Sep-2026 in our view. We like SMC’s dominant market position in multiple sectors, long operating track record and diversified operations. Yet it incurs sizable airport and infrastructure capex that would likely keep its credit metrics elevated and free cash flows negative. Meanwhile, we remain watchful of SMC’s ability to support SMC GP past 2025.
Recommendation Reviewed: May 27, 2025
Recommendation Changed: April 05, 2023
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN
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Fundamental View
AS OF 27 May 2025Petron’s FY24 results improved slightly; we expect Petron’s credit metrics to remain flat to improve slightly in FY25 owing to higher capex and flattish % YoY EBITDA growth amid a single-digit YoY decline in sales volume growth though partially supported by lower crude oil input costs
About two-third of its total revenues are derived from the Philippines and are indexed to Dubai crude prices, which allows for smooth cost pass-throughs and good insulation from crude price volatility.
Free cash flows are typically negative due to inventory fluctuations that outweigh low capex.
Business Description
AS OF 27 May 2025- Petron is the largest oil refining and retailing company in the Philippines, and the third largest player in Malaysia. It maintains a 24% market share in the Philippines (followed by Shell and Caltex) and a 20% market share in Malaysia (largest being Petronas), based on total fuel sales volumes.
- Petron has a total refining capacity of 268k barrels/day (bpd) and accounts for about 30% of the Philippines' fuel needs. Its petroleum refining facilities include the Limay Refinery in Bataan, Philippines (capacity of 180k bpd; 67% of total) and the Port Dickson Refinery in Negeri Sembilan, Malaysia (capacity of 88k bpd; remaining 33% of total).
- Petron's refineries process crude oil into a full range of petroleum products including gasoline, diesel, LPG, jet fuel, kerosene and petrochemicals.
- It further markets and retails these fuel products through its fuel service stations located across the Philippines (~1,800 outlets) and Malaysia (>800 outlets).
- Petron sources its crude oil supplies from third-party suppliers, namely Saudi Aramco, Kuwait Petroleum Corporation and Exxon Mobil, which are bought on the basis of term contracts and in the spot market.
- Petron mainly supplies its petroleum and fuel products to customers in Malaysia and the Philippines (~95% of annual revenue).
- Petron is 68% owned by San Miguel Corporation (SMC), one of the largest and most diversified conglomerates in the Philippines based on total revenues and assets. SMC's CEO, Mr. Ramon Ang, is also Petron's CEO.
Risk & Catalysts
AS OF 27 May 2025Petron cannot fully pass on higher crude oil input costs to customers in Malaysia.
Petron operates in low-margin business (EBITDA margins ~5%) and maintains elevated credit metrics.
Petron is highly dependent on its Limay petroleum refining complex that makes up two-thirds of its total refining capacity (67%). Any events that disrupt the refinery’s operations could adversely affect Petron’s total revenues.
Key Metric
AS OF 27 May 2025| PHP bn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 74.0% | 75.1% | 74.5% | 74.1% | 73.4% |
| Net Debt to Book Cap | 65.5% | 68.2% | 67.1% | 66.3% | 63.9% |
| Debt/Total Equity | 284.2% | 301.4% | 292.0% | 285.4% | 275.8% |
| Debt/Total Assets | 70.2% | 67.6% | 64.9% | 65.3% | 64.3% |
| Gross Leverage | 10.9x | 7.1x | 7.4x | 6.5x | 7.2x |
| Net Leverage | 9.7x | 6.4x | 6.7x | 5.9x | 6.3x |
| Interest Coverage | 2.2x | 2.2x | 1.9x | 2.2x | 1.9x |
| EBITDA Margin | 3.4% | 5.3% | 4.7% | 5.8% | 6.5% |
CreditSight View Comment
AS OF 27 May 2025We maintain our Market perform recommendation on Petron. Petron’s c.Apr-2026 perp trades rightfully tighter than SMC c.Jul-2025 perp, which we see as fair given its Opco structure vs. SMC’s Holdco, its cost pass-through mechanisms, and low capex which more than offset SMC’s larger diversified businesses. Overall, we continue to take comfort in Petron’s resilient credit profile, supported by a good cost-passthrough contractual mix that provides good insulation from crude price volatility. We expect Petron to incur higher capex YoY, and expect credit metrics to remain flat-to-improve slightly in FY25 owing to higher capex and flattish % YoY EBITDA growth amid lower crude oil input costs, as well as a further ~PHP 15 bn of preference share issuances.
Recommendation Reviewed: May 27, 2025
Recommendation Changed: January 26, 2022
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN
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Fundamental View
AS OF 23 May 2025UBS agreed to acquire Credit Suisse in March 2023 after the latter collapsed following a severe liquidity crisis.
CS was a large and complex organisation, so the integration, and the inevitable associated losses and costs, will dominate UBS’s strategic outlook and financial performance for several years.
However, UBS was able to negotiate substantial downside protection which should shield it from losses at CS.
Away from CS, UBS has reshaped its business model, with a greater emphasis on wealth management and less focus on investment banking, particularly fixed income.
Its earnings remain somewhat dependent on capital market conditions, but its capital, asset quality and profitability ratios have been among the strongest for European banks.
Business Description
AS OF 23 May 2025- Headquartered in Zurich, Switzerland, UBS has private, corporate and institutional clients worldwide and retail clients in Switzerland. It is one of the world's largest wealth managers.
- It completed the acquisition of CS on 12 June 2023. It has merged CS’s domestic Swiss bank (Credit Suisse Schweiz AG) with its own domestic bank (UBS Switzerland AG) in 2024, keeping the CS brand “for the time being”.
- CS’s holding company (Credit Suisse Group AG) has been merged into UBS Group AG, so that the group has a single holding company, and the operating subsidiaries, including UBS AG and Credit Suisse AG, were merged on 31 May 2024.
- UBS operates through its Corporate Center and four business divisions: Global Wealth Management, Personal & Corporate Banking, Asset Management, and the Investment Bank, plus a new Non-core and Legacy division following the acquisition of CS.
- The Investment Bank has been restructured in recent years to scale back fixed income trading and focus on equities trading and origination & advisory business.
Risk & Catalysts
AS OF 23 May 2025The acquisition of CS will be a long and complex process, and the necessary restructuring is likely to result in losses and costs, although UBS has substantial protection, not least in the large negative goodwill.
Litigation costs have been a feature of UBS’s results in recent years, although it has agreed settlements in various cases recently.
A French court imposed fines and civil damages of €4.5 bn ($5.1 bn) in February 2019, which UBS appealed. The Court of Appeal retried the case de novo in March 2021 and reduced the fine to €3.75 mn plus civil damages of €800 mn and confiscation of €1 bn. UBS has set aside reserves of €1.1 bn. The French Supreme Court overturned the penalties and damages in November 2023, and the case has been remanded to the Court of Appeal for a retrial.
Key Metric
AS OF 23 May 2025| $ mn | 1Q25 | Y24 | Y23 | Y22 | Y21 |
|---|---|---|---|---|---|
| Return On Equity | 7.9% | 6.0% | 38.4% | 13.0% | 12.4% |
| Total Revenues Margin | 3.2% | 3.0% | 2.9% | 3.1% | 3.2% |
| Cost/Income | 82.2% | 84.8% | 95.0% | 72.1% | 73.6% |
| CET1 Ratio (Transitional) | 14.3% | 14.3% | 14.3% | 14.2% | 15.0% |
| CET1 Ratio (Fully-Loaded) | 14.3% | 14.3% | 14.4% | 14.2% | 15.0% |
| Leverage Ratio (Fully-Loaded) | 5.6% | 5.8% | 5.4% | 5.7% | 5.7% |
| Liquidity Coverage Ratio | 181% | 188% | 216% | 164% | 155% |
| Impaired Loans (Gross)/Total Loans | 0.6% | 0.6% | 0.4% | 0.4% | 0.4% |
CreditSight View Comment
AS OF 09 May 2025We have Market perform recommendations on UBS AG (operating bank) and UBS Group (holding company) having revised the HoldCo recommendation from Underperform in August 2024. Its rescue and takeover of Credit Suisse in March 2023 was a seminal event that has had major consequences for UBS’s strategy and financial performance, as well as carrying substantial execution risk. However, the integration is on track, and UBS’s performance has been steadily improving. Capital, asset quality and liquidity all look strong, although Swiss regulatory capital requirements will continue to increase in coming years.
Recommendation Reviewed: May 09, 2025
Recommendation Changed: August 14, 2024
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN
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Fundamental View
AS OF 23 May 2025Standard Chartered has been making good progress in the past few years, improving its asset quality and profitability and dealing with legacy litigation issues. Capital, funding and liquidity look solid.
However, tensions between China and the West, including reciprocal trade tariffs between the US and China, and global economic headwinds continue to cloud the near term outlook.
Its unusual business mix – headquartered and regulated in the UK but operating primarily in Asia, Africa and the Middle East – means it is well diversified but sensitive to geopolitical developments and emerging market volatility.
Business Description
AS OF 23 May 2025- Standard Chartered PLC is the holding company and listed entity of the group, in which Standard Chartered Bank is the main operating company.
- Although Standard Chartered is headquartered in London and therefore subject to UK banking regulation, its operations are mainly in Asia (Hong Kong is its biggest single market, as part of its Greater China & North Asia region), Africa and the Middle East. It is present in over 60 markets.
- It has the usual variety of businesses across these regions, including corporate and institutional banking, retail banking, commercial banking and private banking. It specialises in trade finance and cross-border cash management.
- The group announced a revised strategy in 2019 aimed at improving profitability after several years of de-risking, with a targeted return on tangible equity of 10%.
- It is classified as a G-SIB, with a regulatory capital buffer of 1%.
Risk & Catalysts
AS OF 23 May 2025Anti-government protests in Hong Kong, a slowing economy in China and a weak commercial real estate sector, and a US/China trade war have threatened the growth and stability of some of Standard Chartered’s key markets.
A number of Standard Chartered’s markets have underperformed in the past and have therefore been seen as turnaround stories, including India, Korea, Indonesia and the UAE.
The group has had to improve its AML and sanctions controls. In April 2019, it paid a $947 mn fine to US authorities over breaches of US sanctions and a £102 mn fine to the UK FCA for AML weaknesses.
Key Metric
AS OF 23 May 2025| $ mn | 1Q25 | Y24 | Y23 | Y22 | Y21 |
|---|---|---|---|---|---|
| Return on Equity | 12.2% | 8.0% | 7.0% | 5.7% | 4.5% |
| Total Revenues Margin | 2.5% | 2.3% | 2.2% | 2.0% | 1.8% |
| Cost/Income | 56.6% | 64.0% | 64.1% | 66.9% | 74.3% |
| CET1 Ratio (Transitional) | 13.8% | 14.2% | 14.1% | 14.0% | 14.1% |
| CET1 Ratio (Fully-Loaded) | 13.8% | 14.2% | 14.1% | 13.9% | 14.1% |
| Leverage Ratio (Fully-Loaded) | 4.7% | 4.8% | 4.7% | 4.8% | 4.9% |
| Loan Impairment Charge | 0.3% | 0.2% | 0.2% | 0.3% | 0.1% |
| Impaired Loans (Gross)/Total Loans | 2.1% | 2.2% | 2.5% | 2.5% | 2.7% |
CreditSight View Comment
AS OF 02 May 2025We revised our recommendation on Standard Chartered HoldCo senior from Underperform to Market perform on 26 April 2023, but we changed our recommendations on Tier 2 and AT1 from Fair to Rich on 10 January 2024. The changes reflect StanChart’s recent resilient performance, while taking into account the potential impact from US tariffs policies and exposure to China. Capital and liquidity ratios are robust, and profitability has improved significantly, but the bank continues to face geopolitical tensions inherent in its extensive operations in Hong Kong, China and the rest of Asia.
Recommendation Reviewed: May 02, 2025
Recommendation Changed: April 26, 2023
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN
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Search topics about wealth insights and investments.Hyundai Motor
- Sector: Manufacturing
- Sub Sector: Automotive
- Country: Korea
- Bond: HYNMTR 5.5 26
- Indicative Yield-to-Maturity (YTM): 4.834%
- Credit Rating : A
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Fundamental View
AS OF 22 May 2025Hyundai Motor Group posted solid 1Q25 results and maintained its FY25 sales and consolidated operating profit guidance. While we continue to expect lower FY25 automotive profitability owing to tariff impacts on its US vehicle sales, which account for 25% of its global unit sales, we expect the tariff headwind to be partially offset by favorable currency and higher financial services profitability along with support by the South Korean government for the automotive sector. We expect these tariff mitigation factors to alleviate our previous concerns regarding potential negative rating actions.
Business Description
AS OF 22 May 2025- Hyundai Motor Co., Ltd. engages in the manufacture and distribution of motor vehicles and parts. It operates through the following business areas: Vehicle, Financial and Other. The Vehicle division offers motor vehicles. The Financial division provides financing, leasing and credit cards. The Other division includes manufacture of railways. The company was founded on December 29, 1967, and is headquartered in Seoul, South Korea.
- Hyundai Capital America benefits from a support agreement with Hyundai Motor (HMC). HCA investor relations confirmed its support (keepwell) agreement contains a fixed charge coverage provision that it views as particularly strong compared to other peers.
Risk & Catalysts
AS OF 22 May 2025Hyundai and Kia both maintained FY25 sales and consolidated operating profit guidance – which did not include the potential impact of tariffs – citing both uncertainty surrounding tariff implementation, especially for USMCA-compliant parts, and strategies to mitigate the tariff impact. Both companies called out the likelihood of price increases to mitigate the tariff impact, while Hyundai management highlighted additional mitigation strategies in their earnings conference call. On a combined basis, the Hyundai Motor Group (HMG) targets FY25 wholesale unit growth of 2% to 7.4 mn units, revenue growth of 5% to 6%, and a consolidated operating profit margin of 8.8% at the midpoint of the range for YoY margin contraction of 40 bp.
The company’s FY25 consolidated operating profit could also benefit from higher captive finance profit and favorable currency impacts related to the weak Korean won, two factors that boosted its 1Q25 profit. The South Korean government announced emergency support for the auto sector, including financial aid and tax cuts to mitigate the impact of US tariffs on imported vehicles.
Key Metric
AS OF 22 May 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | LTM 1Q25 |
|---|---|---|---|---|---|
| Revenue | 94,143 | 113,718 | 130,150 | 136,725 | 139,725 |
| EBIT | 5,459 | 8,950 | 15,440 | 14,189 | 13,945 |
| EBIT Margin | 5.8% | 7.9% | 11.9% | 10.4% | 10.5% |
| EBITDA | 10,015 | 13,998 | 20,387 | 18,476 | 18,237 |
| EBITDA Margin | 10.6% | 12.3% | 15.7% | 13.5% | 13.9% |
| Total Liquidity | 19,745 | 26,639 | 26,507 | 27,488 | 23,397 |
| Net Debt | (5,202) | (11,035) | (10,916) | (11,799) | (15,252) |
| Total Debt | 12,569 | 12,940 | 12,940 | 12,940 | 5,805 |
| Gross Leverage | 1.3x | 0.9x | 0.6x | 0.7x | 0.3x |
| Net Leverage | -0.5x | -0.8x | -0.5x | -0.6x | -0.8x |
CreditSight View Comment
AS OF 05 Jun 2025We upgrade our recommendation on notes of Hyundai Capital America (HYNMTR), Hyundai Capital Services (HYUCAP), and Kia Corp. (KIA) to Outperform from Market perform based on our view the company’s tariff mitigation strategies, its financial services and currency tailwinds, and South Korean automotive sector emergency aid initiatives should help support the company’s profit outlook and enable it to avoid credit rating downgrades. Our recommendation is based on relative value, its geographic diversification, increasing innovative hybrid and EV offerings, and its solid brand positioning within the affordable vehicle category.
Recommendation Reviewed: June 05, 2025
Recommendation Changed: April 28, 2025
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN
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Search topics about wealth insights and investments.Security Bank (PH)
- Sector: Financial Services
- Sub Sector: Banks
- Country: Philippines
- Bond: SECBPM 5.5 29
- Indicative Yield-to-Maturity (YTM): 4.694%
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Fundamental View
AS OF 20 May 2025Security Bank has historically been a wholesale focused bank. Rapid retail expansion pre-pandemic led to a large asset quality hit when COVID-19 struck. The bank completed working through its risk issues at end-2021 and has resumed brisk growth in the retail book since.
The bank had a less well-established deposit franchise than most peers, resulting in a heavy hit to NIMs when rates rose this cycle. This has led it to focus aggressively on growing the higher yielding retail and MSME segments, the latter via forming a new business banking segment in 2022.
Previously high capital ratios have hence fallen; the CET1 ratio is a low 12-13%.
MUFG is a 20% shareholder of Security Bank.
Business Description
AS OF 20 May 2025- Security Bank was established in 1951 and obtained its universal banking license from the BSP in 1994. It is today the 9th largest bank in the Philippines.
- The bank is majority-owned by longtime owner Frederick Y. Dy (23.7%) and MUFG Bank (20%), which acquired its stake in April 2016.
- SB Finance, a joint venture between Security Bank and Thailand's Bank of Ayudhya (Krungsri), a consolidated subsidiary of MUFG, was launched in 2019. The unit is a consumer finance company formed to engage in the unsecured loans business in the Philippines, focusing on the lower mass retail segment.
- Security Bank's loan portfolio is 29% consumer, 3% MSME, 28% middle market and 40% corporate at 4Q24. The consumer and MSME book comprises mortgages (46%), auto loans (21%), credit card (24%) and small business loans (9%).
Risk & Catalysts
AS OF 20 May 2025Any rating downgrade of the Philippine sovereign would have a negative impact on Security Bank.
Margin pressure from the bank’s earlier weaker deposit franchise is easing with the declining rate environment and heavy growth focus on the higher yielding retail and MSME (business banking) segments, which continues to be the strategy going forward.
Capital ratios have fallen due to brisk RWA growth and are now behind peers. They are set to fall by a further ~1 ppt from the buying of a 25% stake in Home Credit Finance Philippines (HCPH) from MUFG, which would take the CET1 ratio to ~12%. We regard this level as low, but do not rule out capital support from MUFG if needed.
Asset quality is showing strains from the brisk growth in riskier segments as we had anticipated. We remain cautious about the asset quality implications given the relatively thin reserve cover and capital buffer.
Key Metric
AS OF 20 May 2025| PHP mn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Net Interest Margin | 4.43% | 4.23% | 4.49% | 4.73% | 4.51% |
| ROA | 1.0% | 1.4% | 1.1% | 1.1% | 1.0% |
| ROE | 5.6% | 8.4% | 7.0% | 8.1% | 7.9% |
| PPP ROA | 2.30% | 2.17% | 1.97% | 2.18% | 2.17% |
| CET1 Ratio | 19.1% | 16.1% | 15.3% | 12.9% | 13.2% |
| Total Equity/Total Assets | 17.88% | 14.94% | 15.62% | 12.50% | 12.95% |
| Gross NPL Ratio | 3.94% | 2.95% | 3.36% | 2.85% | 3.10% |
| Net LDR | 85.7% | 83.0% | 88.8% | 84.6% | 76.8% |
| Liquidity Coverage Ratio | 150% | 144% | 158% | 178% | 179% |
| Net Stable Funding Ratio | 138% | 122% | 131% | 130% | 136% |
CreditSight View Comment
AS OF 21 May 2025Security Bank has historically been a wholesale focused bank. Rapid retail expansion leading up to the pandemic led to a large asset quality fallout. It has since resumed aggressive growth in higher yielding but riskier retail and MSME segments to counter NIM pressure. This along with a now declining rate environment will continue to support the NIM. Asset quality however is showing strains from the brisk growth in riskier segments as we had anticipated. We remain cautious about the asset quality implications given the relatively thin reserve cover and capital buffer (~12% pro-forma for the acquisition of a 25% stake in Home Credit Finance Philippines from MUFG). We have an Underperform recommendation.
Recommendation Reviewed: May 21, 2025
Recommendation Changed: May 21, 2024
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN
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Fundamental View
AS OF 19 May 2025BNP’s financial strength is based on its strong franchises across retail, commercial and investment banking, and its wide business and geographic diversification. Profitability is sound and fairly resilient, while asset quality has held up well.
Uncertainty around the financial health of the French sovereign and its ratings have the capacity to weigh on BNP’s stock price and its credit spreads.
Capital ratios are run tightly considering BNP’s balance sheet size, although this is in the context of its liquid and well-managed risk profile.
Business Description
AS OF 19 May 2025- BNP is one of the most diversified banking groups in Europe, having been created from a merger of the retail/commercial bank BNP and the corporate/investment bank Paribas in 2000.
- Domestic Markets (DM) comprises the Group's four retail banking networks in the eurozone and its three specialised business lines (including leasing and digital banking). The retail banks are French Retail Banking (FRB), BNL in Italy, BNP Paribas Fortis in Belgium and BGL BNP Paribas in Luxembourg.
- International Financial Services (IFS) includes consumer finance, asset management and private banking, and subsidiaries in non-eurozone countries, including TEB in Turkey and BNP Paribas Bank Polska.
- Corporate & Institutional Banking (CIB) is a global provider of financial solutions to corporate and institutional clients and includes BNP's extensive trading and investment banking businesses.
Risk & Catalysts
AS OF 19 May 2025BNP Paribas remains the subject of various claims concerning the Madoff matter; amongst other claims. Litigation provisions on the balance sheet stood at €841 mn at 30 June 2024. BNP says the latest claims against it stand at $1.1 bn as of June 2024.
If there was a negative rating action on the sovereign via an outlook change or notch downgrade, it is possible that BNP’s ratings will be impacted but it is difficult to say with any uncertainty. France represents around 30% of revenues and gross commitments on balance sheet and sovereign bond holdings are moderate; we discuss more below.
There were signs of modest asset quality deterioration in 1Q25, although the bank has not revised its guidance, which targets cost of risk of 40 bp in 2025 and 2026.
Key Metric
AS OF 19 May 2025| mn | Y21 | Y22 | Y23 | Y24 | 1Q25 |
|---|---|---|---|---|---|
| Return On Equity | 8.2% | 8.2% | 9.0% | 9.3% | 9.1% |
| Total Revenues Margin | 1.8% | 1.7% | 1.7% | 1.8% | 1.9% |
| Cost/Income | 67.3% | 60.7% | 62.6% | 61.8% | 63.7% |
| CET1 Ratio (Transitional) | 12.9% | 12.3% | 13.2% | 12.9% | 12.4% |
| CET1 Ratio (Fully-Loaded) | 12.9% | 12.3% | 13.2% | 12.9% | 12.4% |
| Leverage Ratio (Fully-Loaded) | 4.1% | 4.4% | 4.6% | 4.6% | 4.4% |
| Liquidity Coverage Ratio | 143.0% | 129.0% | 148.0% | 137.0% | 133.0% |
| Impaired Loans (Gross)/Total Loans | 3.3% | 2.9% | 2.9% | 2.8% | n/a |
CreditSight View Comment
AS OF 09 May 2025BNP remains one of the more diversified bank names in Europe. Its strong business and geographic diversification has helped it maintain good profitability and asset quality. It has extensive operations in Italy via its subsidiary BNL. Earnings have been resilient, with CIB a stand-out performer. Liquidity and funding metrics look sound. Asset quality has held up well, although an outlier is the group’s personal finance business. The latter is being restructured, to focus more on auto finance rather than personal lending. BNP’s capital position strengthened in 2024 but it will weaken in 2025/6. It is looking to expand now in insurance and asset management, likely to grow fee income. Despite global uncertainty, BNP has not amended any of its target for 2025/2026.
Recommendation Reviewed: May 09, 2025
Recommendation Changed: October 30, 2018
Who We Recommend
SK Hynix
Industrial Bank of Korea
PLN