2009 is shaping up to achieve the sweet spot of loans growth and
expanding NIMs. Philippine banks are achieving this while keeping
asset quality relatively sound, due to the absence of credit over
extension during many years following the 1997-98 Asia Financial
crisis.
■ Philippine banks are among the region’s most liquid, with 60% LDR.
Capital levels are also not a major issue, with the sector’s total CAR of
16% well above the BSP minimum of 10%. Longer term macros also
favour the sector for low credit penetration and a young, fast growing
population.
■ In the Philippine market context, banks fared best in terms of
consensus earnings upgrades of 7.1%, the highest increase in the
market. We also believe equity raising exercises are unlikely to become
widespread, with most banks either having enough capital or not
undertaking an aggressive expansion.
■ We upgrade Philippine banks to OVERWEIGHT as a sector that has
lagged and has fairly attractive valuation. We upgrade BDO and
Security Bank and China Bank to OUTPERFORM, joining existing
sector OUTPERFORMS – Metrobank and BPI.