INVESTORS rallied strongly behind Bank of the Philippine Islands (BPI), analysts said, after the Ayala-led bank reported its planned merger with the Gokongweis’ Robinsons Bank Corp.

BPI, which will be the surviving entity in the merger, was the 10th most actively traded stock last week with a total of 7.13 million shares worth P653.70 million having changed hands on the trading floor from Oct. 3 to 7, data from the Philippine Stock Exchange showed.

BPI shares closed at P93.00 apiece on Friday, up 3.9% from its Sept. 30 closing price of P89.50 each. Year to date, its price has also increased by 2.1%.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan said the stock’s movement during the week was hinged on the merger narrative.

“Aside from this, BPI also received some push from Fitch’s commentary on the merger. The latter said that BPI’s credit rating is not likely going to be affected by the immediate financial implications of the merger,” Mr. Limlingan said in an e-mail.

According to credit rating agency Fitch Ratings, the merger will strengthen BPI’s market position as one of the country’s largest lenders. It also said the merger is unlikely to affect BPI’s support-driven credit ratings.

Joylin F. Telagen, research head at IB Gimenez Research Securities, said in a separate e-mail that at the start and until the end of the week, BPI surged on the back of the merger announcement with Robinsons Bank.

Late last month, the Ayala-led bank said a possible merger is being planned with the Gokongwei group’s Robinsons Bank, with BPI as the surviving entity.

Under the planned consolidation, Robinsons Bank’s shareholders, or the Gokongwei group, will collectively hold approximately 6% of BPI’s outstanding capital stock.

The transaction, which is targeted to be completed before the end of 2023, is subject to the approval of shareholders as well as regulators, including the Bangko Sentral ng Pilipinas, Securities and Exchange Commission, Philippine Deposit Insurance Corp., and the Philippine Competition Commission.

BPI said it was “excited” about the transaction and that the merger “exemplifies [its] strategic effort to expand its client base, accelerate growth, and ultimately increase shareholder value through partnerships” with the Gokongwei group.

The collaboration will also allow BPI to play in the digital banking space, said independent credit research provider CreditSights Inc., a unit of Fitch Group.

Debt watcher S&P Global Ratings said in a commentary that the proposed merger paves the way for collaboration between two of the country’s largest conglomerates.

“We believe the merger would strengthen ties between Ayala Corp., which controls BPI, and the Gokongwei Group. The merger could generate lending and fee income opportunities, given Gokongwei Group’s diverse business operation across the country,” S&P said in a statement.

Others said that operational integration would be manageable and could present cost synergies via the elimination of branch overlaps, given both banks have a domestic focus.

“The merger, I think, is viewed positively by the public, as seen by how BPI behaved when this trading week opened. It rallied strongly. This is because the merger would cement BPI’s standing, it now being the second largest private universal/commercial (UKB) in terms of asset size in the Philippines, better against Metrobank and the others,” Mr. Limlingan said.

For Ms. Telagen, the news was taken on a positive note by the market as it ended “two bearish to bullish side [last] week.”

BPI reported almost an 83% increase in its attributable net income to P12.46 billion in the second quarter from P6.82 billion in the same period in 2021. Gross revenues grew by 35.6% to P32.28 billion from P23.81 billion in the same period last year.

The strong growth brought its attributable net income in the first half to P20.45 billion, up by 73% from P11.82 billion million a year ago.  First-half revenues climbed by 19.8% to P57.64 billion from P48.12 billion previously.

“Without another one-time gain on asset sale like what it recorded in the second quarter, BPI’s bottom line may soften sequentially [in the third quarter]. On the other hand, we forecast BPI’s full-year 2022 net income to grow by at least mid-double digits,” Mr. Limlingan said.

He added that from a purely technical perspective, BPI is currently trading at a discount on its historical moving average.

“Secondly, BPI has sound fundamentals. Its core business is stable, healthy loan composition, and expanding net interest margins,” he said.

Ms. Telagen sees earnings for the third quarter reaching P6.2 billion and expects attributable net income for the entire year to hit P28 billion.

She added that fundamentally, the merger and consolidation with Robinsons Bank is viewed on a “positive note” as combined resources and synergies “will reach new heights that will greatly improve their bottom line.”

“However, with the possible risk of stagflation, I think it’s better to wait at the support level with a better possible risk reward,” she said.

She said market players should trade and invest cautiously.

Ms. Telagen pegged BPI’s support levels at P87.00 while its resistance levels at P100.00.

“Going into next week, BPI’s support is lodged at P88.80. On the other hand, its resistance awaits at P94.10,” Mr. Limlingan said. — Abigail Pelea Yraola