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PLDT
- Sector: Media and TelecommunicationsTechnologyTechnology Media and Telecommunications
- Sub Sector: Telecommunications
- Country: Philippines
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Fundamental View
AS OF 19 May 2025PLDT’s FY24 results were stable as expected; we see a modestly improving FY25 credit outlook aided by resilient EBITDA growth and residual PHP 11 bn of tower sales, which could offset persisting high capex.
A potential stake sale of the data center business could drive further deleveraging.
While the spillover of a PHP 33 bn capex overrun to FY25 could weigh on free cash flows, we draw mild comfort that it was likely not due to fraud but rather a management misstep.
Business Description
AS OF 19 May 2025- PLDT is a leading telecom operator in the Philippines, competing alongside its main rival Globe Telecom in a predominant duopoly.
- PLDT provides 2G/3G/4G mobile, fixed-line, broadband, enterprise data, and other digital services to retail and corporate customers.
- PLDT operates through 2 main business segments – “Wireless Services” and “Fixed Line Services”.
- Its “Wireless” segment offers mobile voice, mobile SMS, mobile data and mobile broadband services to retail customers in the Philippines. These services are marketed under the “Smart Postpaid”, “Smart Prepaid”, "Sun Postpaid" and “TNT Prepaid” brands.
- Its “Fixed Line Services” segment provides fixed line voice, corporate data and home broadband services to retail and corporate customers in the Philippines.
- PLDT commercially launched 5G services on a small-scale basis in Jul-2020. It currently has over 3,000 5G sites nationwide.
- PLDT maintains dominant market shares in the mobile, fixed line voice, and the home broadband spaces.
- PLDT is backed by three established corporate groups, namely First Pacific (~15% stake), NTT Corporation (~12% stake) and JG Summit Holdings (~7% stake).
Risk & Catalysts
AS OF 19 May 2025Aggressive expansion by new entrant DITO over the next 2-4 years could chew away at PLDT’s market share and restrain recoveries in average revenues per user (ARPU).
PLDT incurs significant capex that has restrained improvements in its leverage metrics and free cash flows. This is worsened by a recent capex overrun that has induced mild corporate governance uncertainties (though these have eased in recent months).
Consistently high dividend payouts could worsen PLDT’s already negative free cash flows.
PLDT is exposed to $/PHP depreciation risks ($300 mn 2050 bond is fully unhedged).
Key Metric
AS OF 19 May 2025| PHP bn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 71.9% | 73.3% | 74.2% | 74.1% | 74.3% |
| Net Debt to Book Cap | 65.7% | 69.3% | 72.0% | 70.7% | 71.2% |
| Debt/Total Equity | 256.2% | 273.9% | 287.5% | 286.6% | 288.4% |
| Debt/Total Assets | 46.8% | 49.6% | 53.8% | 49.0% | 53.8% |
| Gross Leverage | 2.9x | 2.9x | 3.0x | 2.9x | 3.0x |
| Net Leverage | 2.7x | 2.8x | 2.9x | 2.7x | 2.9x |
| Interest Coverage | 7.4x | 6.5x | 6.1x | 6.4x | 5.9x |
| EBITDA Margin | 48.7% | 49.1% | 51.1% | 52.0% | 51.7% |
CreditSight View Comment
AS OF 19 May 2025We have a Market perform recommendation on PLDT and would avoid its 2050 bond. PLDT 2031 trades fairly to Globe 2030, Axiata 2030, and Bharti 2031. We do not like the PLDT 2050 that provides a low spread pickup of just 4 bp wider versus the PLDT 2030. We are comfortable with PLDT’s sturdy credit profile aided by a resilient broadband business and tower sales, cushioning high capex and dividends. A minority stake sale of its data center business is also credit positive. Corporate governance fears have also eased post its capex overrun in end-2022. We are watchful of strong competition in the mobile space due to DITO’s ramp up.
Recommendation Reviewed: May 19, 2025
Recommendation Changed: May 31, 2022
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Search topics about wealth insights and investments.Globe Telecom
- Sector: TechnologyTechnology Media and Telecommunications
- Sub Sector: Telecommunications
- Country: Philippines
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Fundamental View
AS OF 15 May 2025Globe’s FY24 earnings grew modestly, with leverage metrics remaining stable. We believe credit metrics may improve modestly in FY25 as modest EBITDA growth, lower YoY capex, and residual tower sales closures through 1H25 are negated by sluggish revenues.
While we acknowledge the stiff competitive pressures brought about by new entrant DITO, the impact is mitigated by Globe’s still-dominant mobile market position and DITO’s slowing expansion (given its weak financials and the costly capex involved).
Weakness in the broadband business has lessened since 3Q24 and could stabilize by mid-2025.
While Globe earlier raised the upper end of its dividend policy, we expect dividend payouts to remain stable.
Business Description
AS OF 15 May 2025- Globe is a leading telecom operator in the Philippines, competing alongside its main rival PLDT in a duopoly setting.
- Globe provides 2G/3G/4G mobile, fixed-line, broadband, enterprise data, and other digital services to retail and corporate customers.
- Globe operates through 2 main business segments – “Mobile Services” and “Fixed Line and Home Broadband Services”.
- Its “Mobile Services” segment offers mobile voice, mobile SMS and mobile data services to retail customers in the Philippines. These services are marketed under the “Globe Postpaid”, “Globe Prepaid” and “TM” brands.
- Its “Fixed Line and Home Broadband Services” segment provides fixed line voice, corporate data and home broadband services to retail and corporate customers in the Philippines.
- Globe commercially launched 5G services on a small-scale basis in Jun-2019. It currently maintains 5G coverage of 96% of the National Capital Region, with over 2,000 5G sites nationwide.
- Globe maintains dominant market shares in the mobile data, voice and SMS space (FY22 revenue market share [RMS] of 52% vs PLDT 40%), but loses out to PLDT in the home broadband space (FY22 RMS of 28%-30% vs PLDT 48%-50%).
- Globe is largely owned by two established corporate groups – Ayala Corporation (~47 stake) and Singtel (~43% stake).
Risk & Catalysts
AS OF 15 May 2025Globe faces mounting competitive pressures from new mobile entrant DITO and incumbent broadband competitor PLDT.
Aggressive expansion by new entrant DITO over the next 2-4 years could chew away at Globe’s market share and restrain recoveries in average revenues per user (ARPU).
Globe incurs heavy capex that has pressurized its leverage metrics and free cash flows. That said, capex had peaked in FY23 and should meaningfully decline ahead.
Consistent dividend payouts could weigh on Globe’s free cash flows; Globe recently raised the upper end of its dividend policy from 75% to 90% of net income, suggesting an increased skew to shareholder-friendly actions.
Key Metric
AS OF 15 May 2025| PHP bn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 67.5% | 69.7% | 70.2% | 69.6% | 69.5% |
| Net Debt to Book Cap | 63.7% | 66.6% | 66.4% | 66.4% | 66.2% |
| Debt/Total Equity | 208.1% | 230.5% | 235.8% | 229.1% | 227.9% |
| Debt/Total Assets | 57.1% | 60.3% | 62.4% | 60.0% | 61.4% |
| Gross Leverage | 3.9x | 4.3x | 4.4x | 4.3x | 4.4x |
| Net Leverage | 3.7x | 4.1x | 4.2x | 4.1x | 4.2x |
| Interest Coverage | 5.9x | 4.6x | 4.3x | 4.4x | 4.2x |
| EBITDA Margin | 46.7% | 47.7% | 49.7% | 49.4% | 49.9% |
CreditSight View Comment
AS OF 15 May 2025We have a Market perform recommendation on Globe with a preference for its c.2026 perp. Globe 2030 trades slightly wider to PLDT 2031 that we view as fair. Globe c.2026 perp trades at a juicy 1.4x perp-to-Globe 2030 senior multiple that we view as attractive for short-dated “IG” paper. We anticipate a modestly improving credit outlook as lower capex and residual tower sales closures are offset by a continued weak broadband business and sticky dividends. Stiff competition in both the mobile and broadband spaces is a key concern too. Globe also recently revised its dividend policy to 60%-90% of PAT from 60%-75% previously, suggesting an increased skew towards shareholder-friendly actions, though this has not happened yet.
Recommendation Reviewed: May 15, 2025
Recommendation Changed: June 18, 2024
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Fundamental View
AS OF 15 May 2025UOB has strong stand-alone credit profile and benefits from the high likelihood of support from the government of Singapore, where it is one of the three major local banks.
The bank is more focused on Singapore and Southeast Asia than on Greater China; its traditional strengths are the SME and retail sectors, although its large corporate book is now over 60% of loans.
UOB has been conservatively managed with a sound risk profile, a strong focus on liquidity and a long track record of relatively good performance.
Business Description
AS OF 15 May 2025- UOB was established in 1935 as a Chinese family-owned bank catering to the Hokkien (Fujian) community, Singapore's largest Chinese ethnic sub-group. The Wee family owns about 18% of the shares. A further 5.18% is held by the Lien family which previously controlled Overseas Union Bank, which UOB merged within 2001. The Wee family has significant real estate and hospitality interests in Singapore and regionally.
- UOB's main markets are Singapore and Malaysia where its presence dates back to before Singapore's independence. It expanded through acquisitions in Thailand (Bank Radanasin and Bank of Asia) and Indonesia (Bank Buana), and more recently bought over Citi's consumer franchise in Malaysia, Thailand, Indonesia and Vietnam.
- Franchise strengths are in SME and consumer lending. Building & construction accounts for 27% of loans, followed by housing at 24%, financial institutions at 12% and general commerce at 11% at 4Q24.
- Loans by geography comprise Singapore at 49% of loans, Greater China at 15%, Malaysia at 10%, Thailand at 8%, and Indonesia at 3% at 4Q24.
Risk & Catalysts
AS OF 15 May 2025UOB has a greater focus on Southeast Asia than its Singapore bank peers, which leaves it open to more asset quality risk in a downturn / high interest rate environment.
The bank has benefited more from the final Basel III rules implementation than its peers – its CET 1 ratio was previously the lowest among the three but now aligns with peers.
Its NPL coverage ratio of 90% is around 50-70 ppt behind peers. However, both collateral and UOB’s SGD 2.8 bn in general provisions will be more than sufficient.
Key Metric
AS OF 15 May 2025| SGD mn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| PPP ROA | 1.23% | 1.31% | 1.52% | 1.51% | 1.56% |
| ROA | 0.92% | 0.99% | 1.19% | 1.19% | 1.11% |
| ROE | 10.2% | 11.9% | 14.2% | 13.7% | 12.3% |
| Equity to Assets | 9.3% | 8.6% | 8.8% | 9.2% | 9.6% |
| CET1 Ratio (fully-loaded) | 13.5% | 13.3% | 13.4% | 15.4% | 15.4% |
| NPL Ratio | 1.62% | 1.58% | 1.52% | 1.53% | 1.60% |
| Provisions / Loans | 0.20% | 0.20% | 0.25% | 0.27% | 0.35% |
| Liquidity Coverage Ratio | 133% | 147% | 158% | 143% | 143% |
| Net Stable Funding Ratio | 116% | 116% | 120% | 116% | 116% |
CreditSight View Comment
AS OF 09 May 2025UOB is conservatively run with a large family ownership and a sound balance sheet. The bank is more focused on Singapore and Southeast Asia than on Greater China. Outside Singapore, its main operations in ASEAN are in Thailand, Malaysia and Indonesia which collectively make up ~20% of its loan book. It acquired Citi’s consumer operations in Thailand, Malaysia, Indonesia and Vietnam, which has been good for the franchise. The bank has benefitted more from the final Basel III rules implementation than its peers – its CET 1 ratio was previously the lowest among the three but now the three banks have similar CET 1 ratios. UOB’s reserve cover is about 50 ppt behind the other two peers.
Recommendation Reviewed: May 09, 2025
Recommendation Changed: July 04, 2017
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Fundamental View
AS OF 14 May 2025In an industry beset by manufacturing issues and operational hiccups, HWM continues to perform admirably while also paying down debt.
Howmet’s journey up the ratings cycle continues, and we now believe the company will meet the upgrade requirements at all three agencies over the next year, landing the company in the A index by 2026. Howmet management pointed towards 1.1x net leverage by year end, down from 1.4x current (their calculation).
As such, we continue to like HWM and look forward to a continuing spread tightening cycle for the credit.
Business Description
AS OF 14 May 2025- Howmet Aerospace Inc. is the surviving entity of the legacy Alcoa Inc. following two major spin-off transactions in 2016 when Alcoa was spun off and in 2020 when Arconic was spun out. Howmet is now focused on high value add, high margin aluminum, titanium and nickel superalloy casting and forging.
- Products are sold into the Commercial Aerospace , Defense Aerospace, Commercial Transportation, and other end markets. Howmet also has four reportable segments: Engine Products Fastening Systems, Engineered Structures, and Forged Wheels. The Engine Products segment produces investment casting – including airfoils and seamless rolled rings – as well as rotating and structural parts. The Fastening Products segment produces aerospace and industrial fasteners as well as those sold into the commercial transportation, automotive, renewables, construction, and industrial equipment. Engineered Structures produces titanium ingots and mill products for aerospace and defense applications as well as produces aluminum forgings, nickel forgings, and aluminum machined components. Forged Wheels provides forged aluminum wheels and related products for heavy-duty trucks and commercial transportation.
- Howmet operates 62 facilities in 11 different countries (primarily the US and the UK) and receives the majority of its revenue from the US and Europe.
Risk & Catalysts
AS OF 14 May 2025Aerospace industry is still going strong even as there are signs of a potential slowdown. Domestic travel boom significantly benefited narrowbody business while international travel supporting the next stage for widebody recovery.
However, there are signs that passenger demand may start to falter- at least domestically in the US- and we’ll be tracking how much of the booming OE demand will be realized over the next few years. Recent economic volatility certainly hit airline demand in the early parts of 2Q.
Increased energy demand driven by the AI boom will be driving higher volumes and demand for HWM’s portfolio of IGT products.
Forged wheels segment faces persistent headwinds from the still-weak trucking industry. However, HWM has an edge in the segment thanks to its lightweight products.
Tariffs impacts appear to be minimal thanks to the ability to pass the costs to customers.
Key Metric
AS OF 14 May 2025| $ mn | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|
| Revenue | 5,663 | 6,640 | 7,430 | 7,548 |
| EBITDA | 1,276 | 1,508 | 1,914 | 2,037 |
| EBITDA Margin | 22.2% | 23.0% | 26.8% | 28.8% |
| EBITDA-CAPEX-INT % of Revenues | 60.2% | 64.4% | 75.9% | 79.3% |
| Total Debt | 4,162 | 3,706 | 3,315 | 3,324 |
| Net Debt | 3,371 | 3,096 | 2,751 | 2,788 |
| Net Leverage | 2.6x | 2.1x | 1.4x | 1.4x |
CreditSight View Comment
AS OF 01 May 2025Howmet Aerospace (Baa1/BBB/BBB+; S/S/S) reported a 6% YoY revenue increase and a 28% rise in EBITDA, driven by robust performance across defense aerospace, commercial aerospace, and industrial sectors. The company raised its 2025 guidance, anticipating an additional $75mn in free cash flow and $120mn in EBITDA, taking into account the net impact of tariffs. Despite a challenging trade environment, Howmet expects to pass on tariff costs to customers, mitigating a gross impact of $80mn to a net $15mn. With a stock surge of 1100% over five years and a loan-to-value ratio in the A ratings territory, Howmet’s ongoing ratings cycle suggests favorable credit spread tightening, and we continue to like the credit.
Recommendation Reviewed: May 01, 2025
Recommendation Changed: March 02, 2022
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Fundamental View
AS OF 14 May 2025DBS Group has sound standalone fundamentals and benefits from its strong home country. Support may be stronger than peers thanks to its longstanding relationship with the government and Temasek’s ~29% stake.
DBS is a major player in Asian corporate banking, and also has strengths in mass market and private banking. It is also one of Asia’s leading digital banks. Acquisitions have been skillfully handled in the past decade or so.
DBS has performed well in recent years, with a high RoE, and its asset quality has been more resilient than that at UOB and OCBC.
Business Description
AS OF 14 May 2025- DBS was established in 1968 as a development bank but was subsequently privatised and is now commercially run. The Singapore government retains an indirect stake through its investment vehicle, Temasek (~29%).
- In 1998, DBS moved beyond its wholesale bank origins with the acquisition of POSB that brought along a large mass market customer and deposit base. In 2001, it acquired the former Dao Heng Bank in Hong Kong and in 2008, it acquired a part of the failed Bowa Bank in Taiwan, to supplement its Greater China operations. It also regularly acquired wealth management businesses, such as SocGen's Asian private banking business in 2014 and ANZ's Asian retail and wealth management businesses in Singapore, Hong Kong, China, Taiwan and Indonesia in 2018. Recent acquisitions include Lakshmi Vilas Bank in India, a 16.69% stake in China's Shenzhen Rural Commercial Bank, and Citi's consumer business in Taiwan. The bank is also reportedly considering expanding into Malaysia by purchasing Temasek's 29.1% stake in Alliance Bank Malaysia Bhd.
- As of YE24, Singapore accounted for 45% of its loan book, with HK (14%), Rest of Greater China (13%), South & Southeast Asia (8%) and Rest of the World (19%) accounting for the rest.
- The bank is well regarded as a digital leader in the banking space, and has steadily built capabilities in private banking and markets businesses.
Risk & Catalysts
AS OF 14 May 2025Loan growth has been a recent challenge, with ongoing high repayments in Greater China and potential impact from tariffs.
Asset quality has outperformed the other two Singapore majors with very low credit costs.
The bank encountered some operational issues recently. On 30 April 2024, the MAS removed its restriction on DBS’s non-essential activities, which had been imposed in Nov-23 following IT failures. Its retail payments system had another outage on 2 May 2024.
Non-interest income performance was very strong in FY24, establishing a high baseline for FY25. WM fee income growth remained strong in 1Q25.
Key Metric
AS OF 14 May 2025| SGD mn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| PPP ROA | 1.14% | 1.32% | 1.60% | 1.69% | 1.77% |
| ROA | 1.0% | 1.1% | 1.4% | 1.5% | 1.4% |
| ROE | 12.5% | 15.0% | 18.0% | 18.0% | 17.3% |
| Equity/Assets | 8.38% | 7.65% | 8.40% | 8.32% | 8.17% |
| CET1 Ratio (fully loaded) | 14.4% | 14.6% | 14.6% | 15.1% | 15.2% |
| NPL Ratio | 1.27% | 1.13% | 1.11% | 1.09% | 1.10% |
| Provisions / Loans | 0.01% | 0.06% | 0.14% | 0.14% | 0.28% |
| Liquidity Coverage Ratio | 135% | 146% | 144% | 147% | 145% |
| Net Stable Funding Ratio | 123% | 117% | 118% | 115% | 115% |
CreditSight View Comment
AS OF 09 May 2025DBS performed well for several years under CEO Piyush Gupta, who was succeeded by Ms. Tan Su Shan in March 2025. It has comfortable capital and well managed liquidity. Temasek is the main shareholder. DBS has grown its various businesses sensibly and has been a leading bank for adopting digital technology, recent technology outages notwithstanding. It has also steadily grown its fee income and its regional businesses. WM and transaction banking have been focuses, with bolt-on acquisitions/stakes in private banking and Asian retail banking, more recently in India (Lakshmi Vilas Bank), China (SZRCB) and Taiwan (Citi consumer business). It delivered record high FY4 profits. Credit costs are very low, despite a 10 bp increase in 1Q25 to build up buffers against tariff uncertainties.
Recommendation Reviewed: May 09, 2025
Recommendation Changed: June 03, 2016
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Search topics about wealth insights and investments.Bank of Philippine Islands
- Sector: Financial Services
- Sub Sector: Banks
- Country: Philippines
- Bond: BPIPM 5 30
- Indicative Yield-to-Maturity (YTM): 4.679%
- Credit Rating : BBB
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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 |
Our View
AS OF 21 May 2025BPI is the third largest bank in the Philippines with a long history. 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. Recent brisk expansion in higher yielding retail and MSME loans has strongly improved profitability levels, and while asset quality slipped with the loan mix shift, it remains acceptable. However, we are watchful of risks from the strong growth in the non-wholesale book given that provision reserves have been pared down to lower levels than peers. Still, we remain overall comfortable with BPI given the large corporate book (71% of loans) and underwriting record, and strong provisioning capacity and comfortable liquidity. We move BPI to U/P purely from an RV standpoint.
Recommendation Reviewed: May 21, 2025
Recommendation Changed: May 21, 2025
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Fundamental View
AS OF 09 May 2025Macquarie was tested during the global financial crisis, but managed to steer through the crisis without reporting losses. A strong balance sheet mitigated liquidity problems, but its banking unit had to turn to Australia’s central bank at that time for support.
The group has an impressive track record of managing risks and achieving good returns, and has built capabilities in a number of areas. Divestments are controlled based on the market environment. It has been a beneficiary of market volatility in the commodity space. Its Australian mortgage book has also shown strong but sensible growth.
Business Description
AS OF 09 May 2025- Macquarie grew out of the Australian business of Hill Samuel Australia, commencing operations in 1969. Macquarie Group Ltd (MGL) is the holding company and listed entity, under which there is the banking group Macquarie Bank Ltd (MBL) which consists of the Banking & Financial Services (BFS) and Commodities & Global Markets (CGM) businesses, and a non-banking group which consists of the Macquarie Asset Management (MAM) and Macquarie Capital (MC) businesses.
- From the 1990s, the group has been associated with the "Macquarie Model" which focused on identifying cash-generating infrastructure assets & packaging them into funds that could be sold, with Macquarie taking fees as banker, arranger and asset manager.
- It acquired asset managers including Delaware Investments in the US and Blackmont Capital in Canada, boutique investment bank Fox-Pitt Kelton and specialists such as Tristone Energy (Canada). It acquired US asset manager, Waddell & Reed in April 2021, which added around US$76 bn of assets under management. It has announced the sale of its public AM business in the US and Europe to Nomura.
- MAM has AUM of ~A$938 bn as of FY24, mostly in "traditional" funds management but also including its specialist infrastructure and real assets funds.
Risk & Catalysts
AS OF 09 May 2025Macquarie has sizable exposures to credit and equity risk, and so could be adversely impacted by falls in asset prices. In addition, volatile/weak markets could impede its ability to exit some of its investments. Its earnings profile partially depends on exits and therefore is lumpy in nature. So far it has managed this risk well.
As a relatively small group operating mainly in wholesale markets, it is vulnerable to a liquidity freeze, but it mitigates this through running a well-matched and liquid balance sheet.
It is a global leader in infrastructure investments and is well positioned for the green transition. It has been a strong beneficiary of volatility in commodity markets, a testament to its risk management capabilities.
Its banking unit, MBL, has been subject to enforcement action in Apr-21 by APRA over the incorrect treatment of some intra-group funding arrangements resulting in a A$500 mn operational risk overlay being applied as well as LCR and NSFR add-ons.
Key Metric
AS OF 09 May 2025| AUD mn | 1H23 | 2H23 | 1H24 | 2H24 | 1H25 |
|---|---|---|---|---|---|
| Operating Income | 8,910 | 10,666 | 8,060 | 9,011 | 8,570 |
| Operating Expense/Operating Income | 62.8% | 61.3% | 73.4% | 68.2% | 69.1% |
| Net Profit | 2,305 | 2,877 | 1,415 | 2,107 | 1,612 |
| ROAE | 15.6% | 18.1% | 8.7% | 12.9% | 9.9% |
| Total Impairments/Op Profit | 8.6% | 4.1% | (5.5%) | (8.8%) | 2.8% |
| Annuity Business Profit Contribution | 43.3% | 27.0% | 36.6% | 36.4% | 44.2% |
| MBL CET1 Ratio (APRA) | 12.8% | 13.7% | 13.2% | 13.6% | 12.8% |
| MBL Liquidity Coverage Ratio | 172% | 214% | 199% | 191% | 194% |
| MBL Net Stable Funding Ratio | 116% | 124% | 114% | 115% | 110% |
CreditSight View Comment
AS OF 13 May 2025Macquarie has a strong record of profitability since its inception. Its asset mgmt business focused on infrastructure, and more recently green assets, is a global leader. It manages risks and returns effectively, and in FY22+23 was a large beneficiary of O&G and power price volatility. The Australian banking business has steadily gained mortgage marketshare. Large investment disposals from asset mgmt and Macquarie Capital led to a record year in FY22; strong commodities outperformance led to another record in FY23. FY24 income was lower on lower a) asset realisations and b) gas & power inventory management and trading income. 2H25 net income was helped by asset sales. Capital is adequate, ALM is conservative, and being APRA regulated is a plus. We like the bank AT1s and short dated T2s.
Recommendation Reviewed: May 13, 2025
Recommendation Changed: July 25, 2024
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Search topics about wealth insights and investments.International Container Terminal Services Inc
- Sector: Transportation
- Sub Sector: Shipping and Infrastructure
- Country: Philippines
- Bond: ICTPM 3.5 31
- Indicative Yield-to-Maturity (YTM): 4.96%
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Fundamental View
AS OF 07 May 2025We expect ICTSI to remain resilient amid global growth slowdown fears owing to yield improvements and strong cost control.
ICTSI has steadily deleveraged over the past 5 years which we see as prudent financial management. Yet management’s recent lean towards growth at the expense of deleveraging could restrain improvements in credit metrics.
While ICTSI is exposed to material EM-related geopolitical risks, we think its geographically diversified revenue base across 20 countries limits country-specific risks.
While sizable capex and high dividend payouts could strain ICTSI’s credit profile, we take comfort in ICTSI’s robust OCF generation that should keep FCFs positive.
Business Description
AS OF 07 May 2025- ICTSI develops and operates common user container terminals, with a focus on those within Origin and Destination (O&D) ports based in emerging markets.
- ICTSI provides integrated ports services that facilitate the receiving, handling and storage of cargo. These are broadly split into four streams: vessel charges (i.e. services relating to moving cargo on and off ships), yard charges (i.e. services relating to moving cargo in the container and storage yards), storage fees (i.e. services relating to cargo and container storage), and other ancillary fees.
- ICTSI currently operates across 32 port concessions in 19 countries. As of end-FY23, ICTSI's revenues are well diversified across the Philippines (27% of total), Other Asia (14%), EMEA (20%) and the Americas (39%).
- ICTSI operates its container terminals under long-dated concession agreements (typically ~25 years) with the relevant local port authorities or governments. For some concessions, fees charged to customers are regulated by the authorities that prescribe maximum price limits and, in some cases, allow for CPI-linked tariff hikes. For other concessions, fees charged are unregulated and allow for greater price-setting flexibility and volatility too.
- ICTSI is required to make periodic fee payments to the respective authorities for the right to operate the concessions. These payments are typically a combination of fixed charges and variable charges based on cargo traffic volume or gross revenues.
Risk & Catalysts
AS OF 07 May 2025ICTSI is exposed to EM-related geopolitical, regulatory and operating risks. That said, we think the impact is mitigated by its geographically diversified revenue base across 20 countries that limits country-specific risks.
Trade uncertainties from Trump’s policies could hamper cargo volume growth.
Growing capex tendencies and high dividend payouts could strain ICTSI’s free cash flows and credit metrics, though we think the impact is mitigated by ICTSI’s robust operating cash flow generation.
While ICTSI is exposed to FX depreciation risks as most of its revenues and cash expenses are in EM currencies, natural hedging has been fairly effective thus far.
Key Metric
AS OF 07 May 2025| $ mn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 71.9% | 73.0% | 70.1% | 77.0% | 76.3% |
| Net Debt to Book Cap | 58.2% | 61.0% | 52.6% | 60.2% | 63.1% |
| Debt/Total Equity | 255.3% | 269.9% | 233.9% | 334.1% | 321.4% |
| Debt/Total Assets | 62.5% | 60.3% | 58.2% | 63.7% | 59.1% |
| Gross Leverage | 3.1x | 2.9x | 2.5x | 3.1x | 2.3x |
| Net Leverage | 2.5x | 2.4x | 1.9x | 2.4x | 1.9x |
| Interest Coverage | 4.6x | 4.4x | 4.9x | 4.5x | 5.1x |
| EBITDA Margin | 62.8% | 63.0% | 65.0% | 64.9% | 65.7% |
CreditSight View Comment
AS OF 07 May 2025We have a Market perform recommendation on ICTSI. We think ICTSI 2030 and 2031 trades fairly to PLDT 2031 and Globe Telecom 2030. We expect ICTSI’s credit metrics could remain improve slightly in FY25 as steady yield improvements and sturdy domestic trade activity could outweigh high capex, potential M&A, and trade uncertainties from Trump’s policies. While ICTSI is exposed to EM-related geopolitical and operating risks (notably in the Mid East and Russia-Ukraine), we believe these are mitigated by its highly geographically diversified revenues. We also expect ICTSI’s robust cash-generative business to drive positive free cash flows even amid persisting capex and dividends. We see low non-call risk for the ICTSI c.2026 perp
Recommendation Reviewed: May 07, 2025
Recommendation Changed: August 16, 2023
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Fundamental View
AS OF 07 May 2025BDO Unibank (BDO) is the largest bank in the Philippines in terms of assets & market share.
Given its size and systemic importance, BDO is considered too big to fail and is strongly likely to be supported by its controlling shareholder SM Investments, as well as the Philippine government in times of stress.
BDO is widely viewed as the soundest bank in the country given its strong fundamentals, well-diversified businesses, and good management.
Business Description
AS OF 07 May 2025- BDO Unibank was established as Acme Savings Bank in 1968, and was then acquired by SM Investments in 1976. It became a commercial bank in 1994 and a universal bank in 1996.
- BDO was listed in May 2002. SM Investments remains the bank's largest shareholder with a 41% stake.
- BDO has expanded through a series of M&As. Among its key transactions, it merged with Dao Heng Bank Philippines in 2001, Banco Santander Philippines in 2003, UOB Philippines in 2005, Equitable PCI Bank in 2007, GE Money Bank in 2009, Citibank Savings, DB Trust and Real Bank in 2014, One Network Bank in 2015 (the largest rural bank in the Philippines), and RB Pandi's banking business in 2019. It also acquired the insurance business of Generali in the Philippines in 2016.
- BDO has the largest distribution network in the country and is ranked the largest bank in terms of consolidated resources, total assets, loans, deposits and trust funds under management.
- Its loan book is split 50% large corporates, 25% middle market, and 25% consumer at 1Q25. 42% of the consumer book comprises mortgages, 27% are credit cards, 13% are auto loans and the remaining are personal loans (13%) and others (5%).
Risk & Catalysts
AS OF 07 May 2025Direct impact from US tariffs is limited given that the Philippines is not a major goods exporter, but the second order effects from a slowdown in regional and global growth are not insignificant.
Loan growth is thus likely to continue to be retail-led in FY25 as businesses put borrowing plans on hold. We see few asset quality risks for BDO given a comfortable NPL cover (1Q25: 143%) and build up of the CET1 ratio (1Q25: 14.4%), as well as BDO’s large corporates book (50% of total loans) and underwriting track record.
We see increased margin pressure with more rate cuts anticipated from the BSP now in 2025 to support growth. An overall NIM reduction in FY25 is likely despite reserve requirement ratio (RRR) cuts and an increasing retail share in the overall loan mix.
Any rating downgrade of the Philippine sovereign would negatively impact BDO.
Key Metric
AS OF 07 May 2025| PHP mn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| NIM | 4.05% | 4.14% | 4.37% | 4.35% | 4.31% |
| Reported ROA (Cumulative) | 1.2% | 1.5% | 1.7% | 1.8% | 1.6% |
| Reported ROE (Cumulative) | 10.4% | 13.0% | 15.2% | 15.1% | 13.8% |
| Equity/Assets | 11.7% | 11.3% | 11.5% | 11.8% | 12.1% |
| CET1 Ratio | 13.6% | 13.4% | 13.8% | 14.1% | 14.4% |
| NPL ratio | 2.8% | 2.0% | 1.9% | 1.8% | 1.8% |
| Provisions/Loans | 0.72% | 0.64% | 0.59% | 0.46% | 0.37% |
| PPP ROA | 2.1% | 2.3% | 2.7% | 2.5% | 2.2% |
| Liquidity Coverage Ratio | 145% | 141% | 123% | 132% | 131% |
| Net Stable Funding Ratio | 124% | 124% | 124% | 122% | n/m |
CreditSight View Comment
AS OF 21 May 2025BDO is the largest bank in the Philippines. Management is well-regarded, the business is well-diversified and it is the market leader in many business lines. The NIM has peaked with the turn in policy rates, but non-interest income is close to a third of operating income given good fee generation and overall core profitability is strong. Management aims to sustain returns via normalized credit costs, asset rebalancing towards loans and the reduced RRR requirement. We remain comfortable with BDO given the large corporate book and comfortable NPL cover, as well as underwriting track record, which provide comfort around the robust growth in retail loans. Capital has also been steadily built up with the CET1 ratio at 14.4% at 1Q25. We have BDO on Market perform.
Recommendation Reviewed: May 21, 2025
Recommendation Changed: November 28, 2023
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Search topics about wealth insights and investments.Woori Financial Group
- Sector: Financial Services
- Sub Sector: Banks
- Country: Korea
- Bond: WOORIB 4.875 28
- Indicative Yield-to-Maturity (YTM): 5.108% (Indicative as of March 2)
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Fundamental View
AS OF 06 May 2025Woori FG’s performance record had been less consistent than some of its more commercially focused peers but improved in FY21-22. Its FY23 performance lagged behind its peers, affected by not only the kitchen sinking provisioning exercise but also uniquely amongst the FGs, taking a hit on its other non-interest income. It posted peer-leading profit growth in FY24, partially thanks to not having the ELS compensation issue which hit the other three FGs in 1Q24, but 1Q25 performance was softer due to the same reason.
Asset quality used to be a strength with the lowest NPL ratios and credit costs among the four FGs but has deteriorated since 2Q23, and we no longer see a gap with the other FGs.
Capital standing is a relative weakness with the CET 1 ratio at 12.4% compared to above 13% at peers.
Business Description
AS OF 06 May 2025- Woori's predecessor banks were rescued by the Korea Deposit Insurance Corporation (KDIC) following the 1997 Asian Financial Crisis.
- Woori Bank is one of Korea's 'Big Four' commercial banks. It previously owned two regional banks, Kwangju and Kyongnam, but these were spun off in 2014. Woori also sold its stake in Woori Investment Securities and its savings bank and life insurance arms to NH Financial Group.
- Woori set up a HoldCo (Woori FG) in January 2019 to expand into more diversified business lines, particularly investment banking. It used to have a HoldCo, but it was dissolved in 2014 when it was merged with Woori Bank.
- Its main subsidiaries are 100%-owned Woori Card, Woori Financial Capital (auto leasing), Woori Investment Bank and 72.3%-owned Woori Asset Trust. In August 2024, the group relaunched securities business by acquiring Korea Foss Securities and merging it with Woori Investment. The group has also obtained conditional approval to take over Tongyang Life Insurance and ABL Life Insurance.
Risk & Catalysts
AS OF 06 May 2025Woori FG was for many years majority-owned by the Korean government via the Deposit Insurance Corporation (KDIC), but KDIC has steadily been selling down its shareholding, and Woori purchased and cancelled the remaining shares in 2024. That said, Woori FG remains a large, systemically important bank with strong potential government backing if needed.
Woori FG is less diversified than its peers, with most of its earnings coming from the bank and small contributions from the card and leasing businesses. The group has accelerated its M&A pace this year, relaunching securities business and in the process of acquiring insurance targets.
Its CET 1 ratio is ~1% behind the other three FGs. Management plans to improve it to 12.5% by 2025-year end and 13% in the mid-long term.
Key Metric
AS OF 06 May 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 0.99% | 1.15% | 1.10% | 1.17% | 0.99% |
| ROA | 0.66% | 0.70% | 0.54% | 0.61% | 0.49% |
| ROE | 10.6% | 11.5% | 8.3% | 9.3% | 7.3% |
| Provisions/Loans | 0.17% | 0.26% | 0.53% | 0.45% | 0.45% |
| NPL Ratio | 0.30% | 0.31% | 0.35% | 0.57% | 0.69% |
| Woori Bank CET1 Ratio | 13.0% | 12.7% | 13.2% | 13.1% | 13.5% |
| Equity/Assets | 6.45% | 6.58% | 6.71% | 6.83% | 6.67% |
| Net Interest Margin Bank + Card | 1.62% | 1.84% | 1.82% | 1.70% | 1.70% |
CreditSight View Comment
AS OF 28 Apr 2025Woori FG was for some years the weakest of Korea’s Big 4 Financial Groups with a less consistent track record of managing risk and returns. Operating performance had shown an improvement for the past few years but disappointed in FY23. FY24 results were peer-leading, mainly supported by non-interest income. The group has been seeking opportunities to expand its non-bank businesses. Its new securities entity launched in August 2024 and the group is finalizing a deal to acquire two insurer. The capital impact of the two transactions is small. Both the group and the bank CET1 ratios are behind peers. KDIC’s stake in the group has been completely sold. We have a Market perform recommendation but see the trading levels of its AT1 NC07/29 as attractive.
Recommendation Reviewed: April 28, 2025
Recommendation Changed: April 24, 2017