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Fundamental View
AS OF 13 Aug 2025As one of the world’s largest beverage companies KO operates across a diverse geographic footprint and generates stable and robust free cash flow. Where there is spread dislocation between the two, we are generally comfortable swapping between the two names, as we view both credits as capable of sustaining stable credit metrics. We note that KO’s net leverage is in a conservative position despite a recent increase in debt, at the low-end of management’s 2.0-2.5x range.
Our recommendation largely reflects our preference for KO’s pure-play beverage profile, where we are seeing more resistance characteristics than in snacking categories, where PEP generates just over half of its sales.
Business Description
AS OF 13 Aug 2025- KO is the world's largest beverage company, owning, licensing, and marketing numerous brands in over 200 countries worldwide. It has 4 of the world's top 5 nonalcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Fanta and Sprite.
- KO distributes its product through independent and company-controlled bottling distribution operations. KO largely refranchised its wholly-owned bottlers, selling the operations to independent bottlers. This strategy reduced capital intensity and expanded margins.
- KO has two primary businesses: Beverage Concentrates (59% of revenue) and Finished Sparkling & Still Beverages (41% of revenue). KO uses unit case volume growth and concentrate sales volume to evaluate performance.
- In 2024, the Coca-Cola system sold 33.7 bn unit cases of products worldwide, comprised of 69% from sparkling beverages and 47% from trademark Coca-Cola. The system has broad international exposure, with 84% of unit case volume generated outside the U.S.
Risk & Catalysts
AS OF 13 Aug 2025An unfavorable U.S. tax ruling could still result in some leverage creep depending on the ultimate outcome. KO is appealing the ruling, and we expect recent sales growth and proceeds from the planned IPO of the African bottling operations will mitigate the impact of any eventual penalty on the credit profile.
Management has expressed interest in expanding its presence over time in the alcoholic beverage category, although to this point the company has limited its involvement to licensing arrangements for its soft drink brands with large-scale brewers and distillers.
Sugar-based drinks have frequently been the target of RFK Jr’s MAHA movement, introducing risk of SNAP eligibility loss, which could create demand headwinds.
Key Metric
AS OF 13 Aug 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Revenue | 38,658 | 43,046 | 45,784 | 46,897 | 47,012 |
| EBITDA | 12,898 | 13,961 | 14,719 | 15,446 | 15,829 |
| EBITDA Margin | 33.4% | 32.4% | 32.1% | 32.9% | 33.7% |
| EBITDA-CAPEX-INT % of Revenues | 27.9% | 26.9% | 24.8% | 25.0% | 25.8% |
| Total Debt | 42,761 | 39,149 | 42,064 | 44,522 | 49,446 |
| Net Debt | 31,835 | 28,587 | 29,701 | 31,674 | 37,198 |
| Net Leverage | 2.5x | 2.0x | 2.0x | 2.1x | 2.3x |
| EV / EBITDA | 22.4x | 21.8x | 19.4x | 19.5x | 21.6x |
CreditSight View Comment
AS OF 21 Oct 2025We have an Outperform recommendation on KO bonds, reflecting a slight preference for the credit over its high-A beverage peer, PepsiCo, at similar levels. We view both credits as core holds, but our updated view reflects increased comfort with KO’s ability to navigate an expected tax liabilities related to U.S. Tax Court litigation, as well as recent earnout payments related to the Fairlife acquisition. KO has reported steady organic growth led by continued pricing benefits and stable consumption trends across its portfolio of soft drinks. Management guides to a net leverage target of 2-2.5x and we expect the company to maintain metrics in that range over the medium term. Playing KO vs PEP also allows investors to avoid activist risk at PEP.
Recommendation Reviewed: October 21, 2025
Recommendation Changed: January 16, 2025
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Search topics about wealth insights and investments.BMO Financial
- Sector: Financial Services
- Sub Sector: Consumer Finance and Banking
- Region: Canada
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Fundamental View
AS OF 13 Aug 2025BMO is geographically diversified within Canada & via its commercial banking business in the U.S. and is also well-diversified by revenue with contribution from fee income businesses.
Credit has performed worse than peers in 2024, but losses have stabilized in 2025, based on underwriting and risk management changes in recent years as well as seasoning effects.
Business Description
AS OF 13 Aug 2025- BMO Financial Group is the third largest depository institution in Canada with C$1.44 tn in assets as of F2Q25 and a market capitalization of US$77 bn. Total deposits were C$958 bn at F2Q25.
- BMO operates 1,890 branches in Canada and the United States in 2024.
- As of YE24, BMO had 1,013 branches within the United States, mostly in the Midwest. BMO ranked 11th in deposit market share in the U.S. (SNL), with a top-2 share in Illinois.
Risk & Catalysts
AS OF 13 Aug 2025BMO has a strong core deposit base in Canada and in the U.S., which mitigates the potential for a liquidity event. BMO remains well-capitalized relative to requirements with a target CET1 ratio of 12.5% (13.5% at F2Q25).
BMO closed the acquisition of Bank of the West from BNP Paribas in February 2023, significantly expanding its footprint in the U.S. We don’t expect deal integration to have much impact on the credit profile.
We view real estate-related risk in Canada as manageable for BMO given low LTV of exposures in vulnerable markets and conservative underwriting. Commercial real estate accounts for ~10% of total loans, and office is quite manageable at ~1% of total.
Credit trends have largely stabilized in 1H25, while provisions could incrementally increase in 2H25 in light of current macro uncertainties.
BMO’s reserves and capital levels all point to BMO maintaining a conservative balance sheet stance and having flexibility to manage through a more extended period of macro weakness in Canada.
Key Metric
AS OF 13 Aug 2025| $ mn | FY21 | FY22 | FY23 | FY24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Revenue | 20,509 | 26,727 | 21,694 | 24,095 | 25,173 |
| Net Income | 6,167 | 10,519 | 3,291 | 5,380 | 5,935 |
| ROAE | 0.98% | 0.98% | 0.98% | 0.98% | 0.98% |
| NIM | 1.56% | 1.56% | 1.56% | 1.56% | 1.56% |
| Net Charge-offs / Loans | 0.14% | 0.08% | 0.14% | 0.39% | 0.43% |
| Total Assets | 797,018 | 860,451 | 969,851 | 1,011,587 | 1,042,299 |
| Unsecured LT Funding | 51,915 | 64,886 | 63,418 | 115,839 | 118,598 |
| CET1 Ratio (Fully-Phased-In) | 13.7% | 16.7% | 12.5% | 13.6% | 13.5% |
CreditSight View Comment
AS OF 16 Sep 2025We maintain our Market perform for BMO, with our preference within the group remaining to trade up in quality to RBC and TD. Surprising deterioration in asset quality metrics was the story throughout the latter part of F2024, with provisions well above historical average levels. Management has attributed the weakness largely to large wholesale loans to new borrowers originated in 2021, but given the steady climb in reserve coverage as well as changes to risk management and underwriting in recent years, BMO is confident quarterly provision ratios should moderate across F2025 alongside further potential benefits from efficiency initatives. This appeared to be the case thus far with the improvement in credit performance particularly notable in F3Q25.
Recommendation Reviewed: September 16, 2025
Recommendation Changed: August 26, 2020
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Fundamental View
AS OF 13 Aug 2025PLN enjoys extremely strong ties with the Government of Indonesia (GoI) given its critical policy role of electrifying the nation. Post the launch of Indonesia’s sovereign wealth fund Danantara, PLN is now indirectly owned by the GoI through Danantara.
PLN delivered a robust set of 1H25 results, with total revenue and EBITDA up 5% and 9% YoY respectively driven by resilient power demand across Indonesia
Looking ahead, we expect PLN’s credit metrics to improve in FY25 supported by higher YoY EBITDA, though partially weighed upon by higher capex; we anticipate FY25 EBITDA growth to be in the mid to high single-digit % YoY, mainly attributable to Indonesia’s healthy economic growth, supporting power demand; we also expect power tariffs to remain flat.
Business Description
AS OF 13 Aug 2025- PLN is involved in the entire electricity value-chain, from power generation, to transmission, distribution and retail.
- It alone accounts for 76% (~47 GW) of Indonesia's generation capacity (of which 8 GW is renewable capacity), while IPPs provide the remainder.
- The company controls and operates the entire transmission and distribution network in the country. It is the sole buyer of electricity produced by IPPs, through power purchase agreements (PPAs).
- It sells electricity to well-diversified off-takers – 41% to households, 25% to industrial customers, 21% to businesses and 12% to others.
- Since 2015, the GoI has gradually implemented monthly tariff adjustments for 13 customer groups, so that rates charged to customers are better matched with production costs.
- However, under the Public Service Obligation (PSO), the company will continue to sell electricity at subsidized rates of 50% to 450-volt amperes (VA) power households and 25% to 900 VA power households. The GoI subsequently reimburses the company for the difference between the subsidized tariff rate and production cost, typically within 2-3 months.
Risk & Catalysts
AS OF 13 Aug 2025The company provides subsidized electricity to certain households for which it subsequently receives reimbursements from the GoI; though these payments tend to get delayed during major events such as COVID-19 pandemic.
In order to increase the country’s electrification ratio to 97%, the company had been mandated by the GoI to develop large electricity capacities through the Fast Track II and 35,000 MW Programs. Implementation of such complex programs has required significant capital expenditure, which has led PLN’s FCF to fall deep into the red in recent years and created a funding gap.
The success of the above programs is also contingent on the company’s ability to source coal cheaply, select quality contractors, acquire land rights and receive adequate subsidy reimbursements from the GoI.
Being primarily a thermal power producer, PLN may be viewed unfavourably from an ESG perspective.
Key Metric
AS OF 13 Aug 2025| IDR bn | FY22 | FY23 | FY24 | 1H24 | 1H25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 28.9% | 27.8% | 27.3% | 27.5% | 27.2% |
| Net Debt to Book Cap | 25.2% | 23.7% | 23.0% | 25.4% | 23.9% |
| Debt/Total Equity | 40.7% | 38.5% | 37.5% | 38.0% | 37.3% |
| Debt/Total Assets | 24.6% | 23.4% | 22.5% | 22.9% | 22.1% |
| Gross Leverage | 4.2x | 4.3x | 3.7x | 4.3x | 3.5x |
| Net Leverage | 3.7x | 3.7x | 3.1x | 4.0x | 3.1x |
| Interest Coverage | 4.3x | 3.6x | 3.7x | 3.2x | 3.7x |
| EBITDA Margin | 30.1% | 26.4% | 29.1% | 29.5% | 30.7% |
CreditSight View Comment
AS OF 13 Aug 2025We have a M/P on PLN and prefer its 2042-2050s. While we think PLN’s shorter-dated is trading slightly tighter than our FV, we do not think the widening potential of its shorter dated is sufficient to warrant an Underperform. Overall, we remain comfortable with PLN’s resilient credit profile supported by healthy domestic power demand, good insulation from input cost volatility and strong state-ownership. While there were concerns of the GoI demonopolizing the power sector, we think PLN’s monopoly is likely to stay after President Prabowo reportedly abandoned plans to allow customers to purchase clean electricity directly from renewable energy developers. That said, we think PLN continue to face higher coal-related ESG risk and elevated capex plans that could weigh on its credit metrics.
Recommendation Reviewed: August 13, 2025
Recommendation Changed: December 06, 2024
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Fundamental View
AS OF 13 Aug 2025SBUX operates and licenses Starbucks cafe locations. The company is current midway through a restaurant revamp aimed at boosting traffic following weak results in 2024. The program aims at improving the in-store coffee shop experience by investing in labor and reducing the prioritization of takeaway.
The turnaround program has a large labor investment component that is weighing on margins. The company has a strong cash flow cushion and management has committed to high-BBB ratings.
The goal/hope is a return to top line growth that enables scaling and then a focus on cost improvement, but year-to-date the company has resisted price increases in a market facing continued cost inflation and an increasingly value-seeking consumer environment.
Business Description
AS OF 13 Aug 2025- SBUX is a leading coffee roaster and retailer. The company operates and licenses over 40,000 Starbucks locations worldwide where it sells premium coffee beverages as well as other specialty drinks and prepared foods. Slightly over half the locations are company operated (52%) and the rest are licensed to third party operators.
- In F2024, SBUX generated $36.2 bn in revenue and $7.0 bn in adjusted EBITDA. SBUX has three reporting segments: N. America (75% of F2024 revenue), which covers cafes in the U.S. and Canada; International (20%), which includes China, Japan, Latin America, and EMEA; and Channel Development (4.9%) which includes revenue from other branded products sold outside retail locations through partnerships with large consumer companies such as Nestle and PepsiCo.
- On a geographic basis, SBUX's two largest regions are the U.S. (42% of cafes), and China (19%).
Risk & Catalysts
AS OF 13 Aug 2025In response to the activist attacks, SBUX announced an unexpected change in CEO and hired Brian Niccol, a veteran of the quick service restaurant industry with a successful track record at Taco Bell and Chipotle.
Lower discretionary spending in the U.S. could continue to weigh on SBUX’s sales outlook. We view its premium-priced beverage offerings as having significant risk of consumer trade down into more value-oriented options.
Investments behind the company’s new store imaging have increased costs and weighed on margins, in large part due to significant investments in labor.
Key Metric
AS OF 13 Aug 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 3Q25 |
|---|---|---|---|---|---|
| Revenue | 29,061 | 32,250 | 35,976 | 36,176 | 36,689 |
| EBITDA | 6,775 | 6,385 | 7,252 | 7,001 | 5,819 |
| EBITDA Margin | 23.3% | 19.8% | 20.2% | 19.4% | 15.9% |
| EBITDA-Capex to Revenue | 18.3% | 14.1% | 13.7% | 11.7% | 8.6% |
| Total Debt | 14,616 | 15,044 | 15,400 | 15,568 | 17,319 |
| Net Debt | 8,160 | 12,226 | 11,848 | 12,282 | 13,147 |
| Net Leverage | 1.2x | 1.9x | 1.6x | 1.8x | 2.3x |
| Lease Adjusted Debt to EBITDAR | 2.9x | 3.1x | 2.8x | 3.0x | 3.7x |
| EV / EBITDA | 20.4x | 17.1x | 16.1x | 17.6x | 20.2x |
CreditSight View Comment
AS OF 25 Sep 2025SBUX is in the early phases of an operational turnaround plan intent on reigniting foot traffic by improving the in-store experience. The “Back to Starbucks” program has come at the expense of margin due to heavy investments in labor. While the plan is ultimately to increase transactions and tickets due to improved experiences, we are skeptical that the company will be able to recoup the margin. Also, the strategy comes at a time when economic uncertainty could weigh on discretionary purchases. Management has committed to high-BBB ratings, but the margin compression is driving some leverage creep. We recommend a wait and see approach to the name and favor McDonald’s bonds in the meanwhile.
Recommendation Reviewed: September 25, 2025
Recommendation Changed: May 01, 2024
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Fundamental View
AS OF 01 Aug 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 1.5x current.
As such, we continue to like HWM and look forward to a continuing spread tightening cycle for the credit.
Business Description
AS OF 01 Aug 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 01 Aug 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. .
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 01 Aug 2025| $ mn | Y22 | Y23 | Y24 | LTM 2Q25 |
|---|---|---|---|---|
| Revenue | 5,663 | 6,640 | 7,430 | 7,721 |
| EBITDA | 1,276 | 1,508 | 1,914 | 2,143 |
| EBITDA Margin | 22.2% | 23.0% | 26.8% | 28.7% |
| EBITDA-CAPEX-INT % of Revenues | 60.2% | 64.4% | 75.9% | 81.5% |
| Total Debt | 4,162 | 3,706 | 3,315 | 3,258 |
| Net Debt | 3,371 | 3,096 | 2,751 | 2,713 |
| Net Leverage | 2.6x | 2.1x | 1.4x | 1.3x |
CreditSight View Comment
AS OF 18 Sep 2025Howmet Aerospace delivered a strong Q2 2025 with revenue up 9% and adjusted EBITDA up 22% year-over-year, supported by robust aerospace and industrial demand. All segments met or exceeded expectations for revenue and adjusted EBITDA, with notable outperformance in Engine Products and margin expansion across the portfolio. Management raised full-year 2025 guidance for revenue, adjusted EBITDA, and free cash flow, reflecting continued operational momentum and end-market strength. Balance sheet metrics improved further as leverage declined, supported by higher EBITDA, steady free cash flow, and ongoing debt reduction alongside increased capital returns. We reiterate our Outperform view and continue to expect rating agency upgrades to low A ratings as Howmet’s credit profile strengthens.
Recommendation Reviewed: September 18, 2025
Recommendation Changed: March 02, 2022
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Fundamental View
AS OF 31 Jul 2025Relative to food-oriented peers, KDP benefits from exposure to faster growing, higher margin beverage & coffee categories. However, coffee categories are exposed to underlying commodity swings; coffee is currently experiencing an inflationary cycle.
Management has adopted a more conservative posture on leverage and reduced its target by half a turn to 2.5x or lower. The reduced leverage target implies roughly a full turn of improvement from current levels in the mid-3x area.
Despite the current emphasis on leverage reduction, management has maintained that M&A remains a longer-term priority. Still, we are comfortable with KDP credit and favor taking on any spread pickup opportunities over F&B peers.
Business Description
AS OF 31 Jul 2025- KDP is the result of a July 2018 merger between Dr Pepper Snapple and Keurig Green Mountain. The merger combined a traditional soft drinks company (DPS) with a faster growing coffee platform that includes the market's leading single serve brewing system.
- The merger was backed by JAB Holdings via its affiliate, Maple Holdings BV. While JAB has trimmed its stake in recent periods, it still controls ~16% of the shares.
- KDP recorded $15.4 bn in 2024 net sales with adjusted EBITDA of $4.5 bn. The business is heavily concentrated in North America, and results are reported across three operating segments: U.S. Refreshment Beverages (61% of 2024 sales), U.S. Coffee (26% of sales), and International (13.0% of sales).
- Examples of KDP's key brands include Dr Pepper, Keurig, Snapple, Canada Dry, 7Up, Mott's, and A&W. The company also partners with other leading coffee brands from various producers via licensing and manufacturing agreements for K-cups.
Risk & Catalysts
AS OF 31 Jul 2025Management has historically guided to M&A as a key capital allocation priority, but recent deal activity has been biased toward bolt-on opportunities and management emphasized integrating recently purchased assets while bringing leverage down to the 2.5x area.
KDP has exposure to elevated input costs, particularly for green coffee beans. KDP took pricing in coffee, and is expecting some elasticity, but they plan to management to stable profit dollars, and could seek to raise prices further in 2025.
Given the increased value-seeking mindset of consumers, KDP could see a tradedown benefit if coffee prices rise across the board.
Key Metric
AS OF 31 Jul 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Revenue | 12,683 | 14,057 | 14,814 | 15,351 | 15,759 |
| EBITDA | 3,908 | 3,932 | 4,189 | 4,521 | 4,614 |
| EBITDA Margin | 30.8% | 28.0% | 28.3% | 29.5% | 29.3% |
| EBITDA-CAPEX-INT % of Revenues | 23.5% | 20.5% | 21.7% | 21.6% | 22.3% |
| Total Debt | 12,024 | 12,104 | 13,308 | 15,595 | 15,927 |
| Net Debt | 11,457 | 11,569 | 13,041 | 15,085 | 15,418 |
| Net Leverage | 2.9x | 2.9x | 3.1x | 3.3x | 3.3x |
| EV / EBITDA | 16.3x | 15.8x | 14.2x | 13.0x | 13.1x |
CreditSight View Comment
AS OF 28 Oct 2025KDP signed a definitive agreement to acquire JDE Peet’s for $22+ bn in August. The deal is expected to close in 1H26. Subsequently the company intends to separate the business into two standalone entities: Global Coffee Co and Beverage Co. Initially, the company contemplated out of the gate pf net leverage, but after pushback from investors, the company is swapping debt financing for PE investments that will reduce pf net leverage to 4.6x. The separation is expected to be ready by year-end 2026. Management will target 3.5-4.0x net leverage at Beverage Co and 3.75-4.25x leverage at Global Coffee Co. We see the new issuance for the merger as a good opportunity to add exposure to the credit.
Recommendation Reviewed: October 28, 2025
Recommendation Changed: October 28, 2025
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Fundamental View
AS OF 30 Jul 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 30 Jul 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 51% large corporates, 24% middle market, and 25% consumer at 2Q25. 41% of the consumer book comprises mortgages, 29% are credit cards, 13% are auto loans and the remaining are personal loans (13%) and others (5%).
Risk & Catalysts
AS OF 30 Jul 2025Direct impact from US tariffs is limited given that the Philippines is not a major goods exporter, but there is likely to be some second order effects from a slowdown in regional and global growth.
Management said that loan growth from corporates has picked up and so healthy broad-based demand has returned across BDO’s market segments. It is comfortable with broadly maintaining the current loan mix, after several quarters of shifting towards retail loans.
We see few asset quality risks for BDO given a comfortable NPL cover (2Q25: 140%) and build up of the CET1 ratio (2Q25: 14.3%), as well as BDO’s large corporates book (51% of total loans) and underwriting track record.
We continue to anticipate a slight NIM squeeze in FY25 along with the declining policy rates. Another 1-2 more 25 bp rate cuts are anticipated from the BSP in 2H25 to support growth.
Any rating downgrade of the Philippine sovereign would negatively impact BDO.
Key Metric
AS OF 30 Jul 2025| PHP mn | FY21 | FY22 | FY23 | FY24 | 1H25 |
|---|---|---|---|---|---|
| NIM | 4.05% | 4.14% | 4.37% | 4.35% | 4.30% |
| Reported ROA (Cumulative) | 1.2% | 1.5% | 1.7% | 1.8% | 1.6% |
| Reported ROE (Cumulative) | 10.4% | 13.0% | 15.2% | 15.1% | 13.9% |
| Equity/Assets | 11.7% | 11.3% | 11.5% | 11.8% | 11.9% |
| CET1 Ratio | 13.6% | 13.4% | 13.8% | 14.1% | 14.3% |
| NPL ratio | 2.8% | 2.0% | 1.9% | 1.8% | 1.8% |
| Provisions/Loans | 0.72% | 0.64% | 0.59% | 0.46% | 0.43% |
| PPP ROA | 2.1% | 2.3% | 2.7% | 2.5% | 2.3% |
| Liquidity Coverage Ratio | 145% | 141% | 123% | 132% | 126% |
| Net Stable Funding Ratio | 124% | 124% | 124% | 122% | n/m |
CreditSight View Comment
AS OF 19 Aug 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. 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 recently robust growth in retail loans. Capital has also been steadily built up with the CET1 ratio at 14.3% at 2Q25. BDO’s sole $ bond likely has low trading liquidity and hence limited opportunity for RV play given the short less than a year to maturity in Jan-26.
Recommendation Reviewed: August 19, 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 29 Jul 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, but FY24 profit growth was peer-leading, partially thanks to not having the ELS compensation issue which hit the other three FGs in 1Q24. 1H25 performance was softer again due to several one-offs.
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 12.8% compared to 13.4-13.7% at peers.
Business Description
AS OF 29 Jul 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 also acquired a 75.34% stake in Tongyang Life and full ownership of ABL Life and has consolidated them since 1 July 2025.
Risk & Catalysts
AS OF 29 Jul 2025Woori FG was for many years majority-owned by the Korean government via the Deposit Insurance Corporation (KDIC), but KDIC has steadily sold 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 KB and Shinhan, 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 since 2024; it relaunched securities business and acquired two insurance companies. The group expects its non-bank profit contribution to rise from the current less than 10% to around 20%.
Its CET 1 ratio is 60-90 bp behind the other three FGs. Management plans to improve it to 13% by 2027.
Key Metric
AS OF 29 Jul 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1H25 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 0.99% | 1.15% | 1.10% | 1.17% | 1.10% |
| ROA | 0.66% | 0.70% | 0.54% | 0.61% | 0.60% |
| ROE | 10.6% | 11.5% | 8.3% | 9.3% | 9.1% |
| Provisions/Loans | 0.17% | 0.26% | 0.53% | 0.45% | 0.49% |
| NPL Ratio | 0.30% | 0.31% | 0.35% | 0.57% | 0.71% |
| Woori Bank CET1 Ratio | 13.0% | 12.7% | 13.2% | 13.1% | 14.2% |
| Equity/Assets | 6.45% | 6.58% | 6.71% | 6.83% | 6.69% |
| Net Interest Margin Bank + Card | 1.62% | 1.84% | 1.82% | 1.70% | 1.70% |
CreditSight View Comment
AS OF 28 Jul 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, but 1H25 results lagged again. The group has been seeking opportunities to expand its non-bank businesses. Its new securities entity launched in August 2024 and the group is consolidating the two insurance subsidiaries. Profit contribution from non-bank is expected to increase to ~20%. Both the group and the bank CET1 ratios are behind peers. We have a Market perform recommendation but see the trading levels of its AT1 NC07/29 as attractive.
Recommendation Reviewed: July 28, 2025
Recommendation Changed: April 24, 2017
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Fundamental View
AS OF 29 Jul 2025Shinhan FG was the best-managed of the large Korean financial groups over many years. During the Asian Financial Crisis, it took advantage of the opportunity to acquire competitors and other businesses, increasing its scale and expanding its business lines.
Its performance has been more variable in the past few years. After a bumpy 2020, it had a better FY21 and FY22, thanks to rising interest rates. However, operating performance turned weak again in FY23, and its FY24 profit growth was softer than peers, impacted by non-bank performance.
In addition to owning a Big 4 bank in Korea, Shinhan FG also has a diversified non-banking business portfolio, including a leading credit card company and a top 10 securities firm.
Business Description
AS OF 29 Jul 2025- Shinhan Financial Group (Shinhan FG) is one of Korea's most diversified financial groups and the holding company of the second largest Korean bank - Shinhan Bank. It also has credit cards, securities, asset management and insurance subsidiaries.
- Shinhan Bank was set up in 1982 with seed capital from Korean residents in Japan. It was more professionally managed than the heavily politicised older banks and came through the 1997 Asian Financial Crisis in relatively good shape, taking the opportunity to acquire the larger and much longer-established Chohung Bank in 2003.
- In 2007, it made another timely acquisition, buying LG Card from its creditors after it failed during the 2003 Korean consumer lending crisis. Shinhan Card is the largest card issuer in Korea.
- Shinhan is also looking for overseas opportunities where growth is strong and Korean businesses have a presence, with a focus on Vietnam (where Shinhan Card also bought a consumer finance business in 2019) and Indonesia.
Risk & Catalysts
AS OF 29 Jul 2025As one of Korea’s “Big Four” financial groups, we believe Shinhan FG would likely receive governmental support if needed.
Asset quality pressure has been rising from domestic real estate project financing at non-bank subsidiaries, with credit costs rising from very low levels. Management has revised its FY25 credit costs outlook up from around 40 bp to the mid-to-high 40 bp range.
Loan growth has been soft this year due to both weaker demand and the need to defend its 13% CET 1 ratio target; it will also face tighter regulation on mortgage lending like its peers.
Profit growth may encounter challenges if there is volatility in the KRW, which could lead to significant FX losses, or if the high-rate environment in the US persists, causing further overseas CRE valuation losses.
Key Metric
AS OF 29 Jul 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1H25 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 1.11% | 1.10% | 1.23% | 1.19% | 1.35% |
| ROA | 0.66% | 0.72% | 0.66% | 0.63% | 0.84% |
| ROE | 9.2% | 10.0% | 8.6% | 8.4% | 11.4% |
| Provisions/Average Loans | 0.28% | 0.34% | 0.57% | 0.51% | 0.47% |
| NPL Ratio | 0.39% | 0.41% | 0.56% | 0.71% | 0.80% |
| CET1 Ratio | 13.10% | 12.79% | 13.17% | 13.06% | 13.59% |
| Equity/Assets | 7.3% | 7.6% | 7.8% | 7.6% | 7.6% |
| Net Interest Margin | 1.81% | 1.96% | 1.97% | 1.93% | 1.90% |
CreditSight View Comment
AS OF 28 Jul 2025Shinhan FG is one of the four nation-wide commercial banking groups in Korea, with a leading credit card arm. It had over many years the best operating track record, but have shown more consistent performance with peers in recent years. More recently, its 1H25 returns remained high and just behind KBFG. Its CET 1 ratio was also slightly behind KBFG but leading the other two peers. However, it failed to deliver its commitment to enhancing its NPL coverage ratio in 2Q25, although the figure remained at a comfortable level. We have a Market perform recommendation at both group and bank levels.
Recommendation Reviewed: July 28, 2025
Recommendation Changed: September 22, 2020
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Search topics about wealth insights and investments.Reliance Industries
- Sector: Manufacturing
- Sub Sector: Diversified Conglomerates
- Country: India
- Region: India
- Bond: RILIN 4.125 25
- Indicative Yield-to-Maturity (YTM): 5.531% (Indicative as of March 2)
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Fundamental View
AS OF 29 Jul 2025We are comfortable with Reliance’s large diversified scale of operations and dominant presence in various key sectors (refining, petrochemicals, retail and telecom), which allows for earnings resilience.
We believe a lackluster oils-to-chemicals outlook is well mitigated by strong outlooks for telecom and retail.
Plans to ramp up its renewable energy business could provide the next leg of growth and improve ESG perception.
Reliance incurs significant capex that has weighed on free cash flow generation, though we acknowledge its historically prudent financial management and robust credit metrics that provide ample elbowroom for some credit profile deterioration.
Business Description
AS OF 29 Jul 2025- RIL is an Indian diversified conglomerate engaged in oil & gas refining, marketing, petrochemicals, organized retail, telecom and digital services, amongst others. It is the largest company in India by revenue, profits, exports and market capitalization (INR 20 tn).
- It is the second largest refiner in India and produces petroleum products such as petrol, high-speed diesel (HSD), aviation turbine fuel (ATF), LPG and lubricants.
- It is the largest petrochemicals producer in India, boasting production of ~38 mn tons in FY20. Through its integrated Jamnagar refinery complex, it produces Polymers/Plastics, Elastomers (synthetic rubber) and Polyester products.
- It is the largest retailer in India in terms of revenue. It operates 18.8k stores (as of March 2024) to sell products ranging from consumer electronics, fashion and lifestyle, grocery, petrol retail and telecom and digital services. It launched its online retail channel, 'JioMart', in December 2019.
- Reliance Jio is the largest mobile telecom operator by subscriber base (482 mn as of March 2024) in India and boasts the widest 4G wireless network in the country.
- In 2021, RIL announced investments to the tune of INR 750 bn/ $10 bn (for next 3 years) to build a renewable energy ecosystem which will include 4 giga factories. Set to be located in Gujarat, the factories will produce solar modules, hydrogen, fuel cells and battery grid to store electricity. Long-term goals also include building 100 GW of PV solar plants by 2030.
Risk & Catalysts
AS OF 29 Jul 2025Reliance’s O2C (oil-to chemicals) margins remain under pressure from global tariff-led growth slowdown concerns and persisting oversupply conditions in China.
Reliance incurs significant capex at historically high levels, particularly from continued investments into its O2C, retail, and nascent renewables businesses. This has weighed on its free cash flow generation, though we take comfort in Reliance’s historically prudent financial management and robust credit metrics.
Reliance faces key-person risk; 65-year old Chairman Mukesh Ambani has begun to hand over the reins of the company’s different business divisions to his children.
Key Metric
AS OF 29 Jul 2025| INR bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 25.9% | 26.4% | 35.3% | 33.1% | 31.9% |
| Net Debt to Book Cap | 24.3% | 23.4% | 29.9% | 26.1% | 24.8% |
| Debt/Total Equity | 34.9% | 35.9% | 54.5% | 49.6% | 46.9% |
| Debt/Total Assets | 21.1% | 21.3% | 28.1% | 26.1% | 24.3% |
| Gross Leverage | 3.5x | 2.9x | 3.2x | 2.8x | 2.9x |
| Net Leverage | 3.2x | 2.6x | 2.7x | 2.2x | 2.2x |
| Interest Coverage | 3.1x | 5.7x | 5.0x | 7.0x | 6.8x |
| EBITDA Margin | 16.6% | 15.3% | 15.9% | 17.7% | 16.9% |
CreditSight View Comment
AS OF 29 Jul 2025We have a Market perform recommendation on Reliance (RIL); we prefer its 2032 and would avoid its 2045 and 2052. We see room for RIL 2032 to tighten 10-15 bp versus Bharti 2031 and PTTGC 2032. We like RIL’s large diversified operations and dominant market shares in key sectors (refining, retail and telecom) that boosts earnings resilience. Its growing renewable business could aid ESG investor sentiment too. While we acknowledge persisting weakness in the O2C segment and RIL’s elevated capex needs, we think the impact is mitigated by RIL’s prudent financial management and healthy credit metrics that provide ample elbowroom for some credit profile deterioration. While key man risk remains a concern, we take comfort in gradually progressing succession plans.
Recommendation Reviewed: July 29, 2025
Recommendation Changed: June 30, 2021
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