Big banks’ share prices rose in Q1 despite uncertainties

LISTED BANKS weathered the first quarter despite trade uncertainties and easing interest rates.

But these same sentiments will still linger in the succeeding quarters, analysts said.

The bellwether Philippine Stock Exchange index dropped by 10.5% year on year to 6,180.72 at the end of the first quarter.

However, the financial subindex, which the banks fall under, climbed by 16.7% annually to 2,374.49 during the period.

In the first three months of the year, 11 of the country’s 14 listed universal and commercial banks’ share prices posted growth year on year.

China Banking Corp. (ticker symbol: CBC) led the pack with a 154.8% annual surge in its share price at the end of the first quarter. It was followed by Philippine National Bank (PNB, 148.2%), Asia United Bank Corp. (AUB, 75%), Rizal Commercial Banking Corp. (RCB, 15.4%), and Philippine Trust Co. (PTC, 15.3%).

Meanwhile, Union Bank of the Philippines’ (UBP) stock declined by 26.7% annually as of end-March, while Philippine Bank of Communications (PBC) dropped by 2.7% drop and BDO Unibank, Inc. (BDO) slipped by 0.8%.

“The performance of listed banks in the first quarter was supported by favorable macroeconomic tailwinds — namely sustained GDP (gross domestic product) growth and a marked decline in inflation — alongside a stable regulatory environment. The BSP’s cautious stance on monetary easing preserved credit stability while allowing room for potential policy support,” said Arielle Anne D. Santos, an equity analyst at Regina Capital Development Corp.

“The weaker-than-expected first-quarter GDP growth (largely due to reduced exports and slower investments amid global trade uncertainties), and still high interest rates have likely contributed to the moderation in industry loan growth for the quarter,” said Abigail Kathryn L. Chiw, BDO Securities Corp. first vice-president and head of research.

She added that the lag effect of the central bank’s policy rate cuts has tempered lending margins for some banks, with the benefit of the reserve requirement ratio (RRR) cuts yet to reflect in the coming quarters.

Jarrod Leighton M. Tin, an equity research analyst at DragonFi Securities, Inc., said that the RRR cuts led to a decline a banks’ deposits with the BSP, effectively freeing up more liquidity used for lending.

“This easing measure has, to some extent, supported loan growth across the banking sector. With the BSP targeting a gradual reduction of the RRR to 0% by 2028, we expect this to contribute to more sustainable credit expansion and help keep NIMs (net interest margins) more manageable, especially as policy rates continue to ease,” he said.

The Philippine economy grew by 5.4% in the first three months of the year, missing the government’s 6-8% growth target.

Inflation eased further to almost five-year low of 1.8% in March, bringing the first quarter average to 2.2%, within the 2-4% target of the Bangko Sentral ng Pilipinas (BSP).

The central bank’s key rate was left untouched in the first three months of the year. But in April, BSP resumed its easing cycle by cutting 25 basis points (bps).

The central bank has so far slashed 100 bps to its key rate since it started its easing cycle in August last year.

Also in February, the central bank announced it will slash the RRR of big banks and nonbank financial institutions with quasi-banking functions by 200 bps to 5% from 7%, effective March 28.

It also trimmed the digital banks’ RRR by 150 bps to 2.5%, while the thrift lenders’ will be lowered by 100 bps to 0%.

Since October last year, rural and cooperative banks’ RRR has been zero.

RRR represents the share of deposits that banks are mandated to retain instead of deploying as loans. A reduction in the RRR effectively frees up liquidity within the banking system, enabling lenders to extend more credit to borrowers and stimulate economic activity.

The country’s largest banks posted an aggregate net income of P94.49 billion as of end-March, growing by 8.6% year on year from P87 billion, data from the BSP showed.

Similarly, the universal and commercial banks’ total assets rose by 7.6% to P25.91 trillion as of end-March, according to central bank data. The big banks’ gross total loan portfolio, which forms the bulk of the total assets, expanded by 13.8% to P14.47 trillion during the period.

The gross nonperforming loans ratio of these big banks improved to 3.02% as of end-March from 3.07% in the same period last year.

Their NIM — a ratio that measures banks’ efficiency in investing their funds by dividing annualized net interest income to average earning asset — likewise inched up to 4.11% as of end-March from 3.96% a year ago.

Big banks’ provision for credit losses, however, climbed by 41.2% to P29.46 billion as of end-March from P20.87 billion last year.

STANDOUTS
BPI and CBC stood out in the first quarter amid strong earnings and loan expansion during the period, analysts said.

“BPI delivered robust results, underpinned by broad-based loan expansion and improved net interest income, reflecting solid execution in a benign credit environment,” Regina Capital’s Ms. Santos said.

“Among the index banks, BPI and CBC stood out, on sustained double-digit earnings growth and RoE (return on equity) of over 15% for the quarter, on the back of: 1) robust loan growth (13% and 19%); 2) better NIMs (+30 bps and +7 bps y-y); and 3) solid asset quality (with NPLs still low at 2.26% and 1.5%),” BDO Securities’ Ms. Chiw said.

Meanwhile, UBP and Security Bank Corp. (SECB) were singled out as underperformers during the period.

“UnionBank’s net income for the first quarter of 2025 was P1.43 billion, a 28.5% decline from the same time the year before. The primary reasons for this decline were front-loaded nonrecurring expenses and one-time, tax-related write-offs from a subsidiary,” said Juan Alfonso G. Teodoro, an equity research analyst at Timson Securities, Inc.

“Security Bank surprisingly stood out negatively as Moody’s downgraded the bank’s outlook from stable to negative,” DragonFi’s Mr. Tin said.

“SECB earnings results came in behind consensus estimate likely due to higher-than-expected provisions in 1Q25. Investor sentiment was further dampened by Moody’s recent outlook revision from stable to negative, which outlined concerns over its capital ratios given the impact of its loan growth to risk-weighted assets, and the stake acquisition in Home Credit Philippines,” said Ralph Jonathan B. Fausto, research associate in Chinabank Securities Corp.

Last May, SECB completed its acquisition of 25% in HC Consumer Finance Philippines, Inc. (aka Home Credit) from MUFG Bank Ltd. for P10.365 billion.

THINGS TO WATCH OUT FOR
Moving forward, investors should continue to monitor the central bank’s policy stance and its current trajectory of rate cuts as well as RRR cuts and GDP growth, DragonFi’s Mr. Tin said.

“Banks may continue to target consumer loans to avoid steeper NIM compression amid lower rates. However, this can also lead to higher provisions for loans, weighing on earnings. Although, this is unlikely to have a serious impact as the banks remain very healthy due to their high NPL coverage,” he added.

“Investors should closely monitor asset quality as banks continue to expand their exposure to the high-yield segments in an effort to sustain lending margins amid expectations of further policy easing,” Chinabank Securities’ Mr. Fausto said.

“We believe market participants should closely monitor lingering global trade uncertainties, particularly the outcome of US President Trump’s tariff measures once the 90-day moratorium expires,” said Jash Matthew M. Baylon, an equity analyst at First Resources Management and Securities Corp.

He added that a renewed flare-up in trade tensions could pressure the Philippine peso and strain foreign exchange liquidity in the banking sector.

In addition, BDO Securities’ Ms. Chiw said: “Risks of reaccelerating inflation and interest rates remaining high and restrictive, could also have knock-on effects to the ability of borrowers to repay their debts. And such risks may require banks to incur more loan loss provisions to buffer against the potential rise in loan delinquencies.” — JPGV