BDO Unibank, Inc. inched down last week after the central bank raised its key rate by 25 basis points (bps), which came amid news of the bank’s third-quarter results and its sale-and-leaseback deal with oil company Phoenix Petroleum Philippines, Inc.
A total of 11.26 million BDO shares worth P1.44 billion were traded from Oct. 23 to 27, data from the Philippine Stock Exchange (PSE) showed, making it the second most actively traded stock for the week.
The Sy-led bank’s share price finished at P128.50 apiece, 0.7% lower than its Oct. 20 close of P129.40 each.
Year to date, the stock’s price grew by 21.6%.
Analysts said that while the latest earnings results of the listed bank elicited some positive reaction from the market, significant developments such as geopolitical tensions and the off-cycle 25-basis-point rate hike of the Bangko Sentral ng Pilipinas (BSP) primarily drove the stock.
“Higher interest rates generally impact equities negatively as investors flee to yield plays,” said Rachelleen A. Rodriguez, research analyst at Maybank Investment Banking Group-Philippines, in an e-mail.
She added that the impact of the rate hike for banks will be that funding costs reprice faster than loans.
Additionally, she said that while the third-quarter performance of BDO came out ahead of her estimates, the market did not significantly react, “which in our view is a result of the noise from several factors including tensions in the Middle East, and the territorial disputes of Philippines and China in the West Philippine Sea.”
Last week, the central bank delivered an off-cycle rate hike ahead of its Nov.16 meeting as it weighed the impact of rising inflation amid upside risks.
The Monetary Board raised its target repurchase rate to 6.5% for the first hike in seven months, bringing the cumulative rate increases since May 2022 to 450 bps.
This was also the highest in 16 years or since the 7.5% in May 2007.
BSP Governor Eli M. Remolona, Jr. said the move to resume monetary tightening was based on the central bank’s latest baseline projections that “point to an elevated inflation path over the policy horizon as upside risks continue to manifest.”
News reports said Phoenix was looking at entering into a sale-and-leaseback agreement with BDO to restructure the oil company’s debts.
Phoenix expects to raise at least P9 billion from the proposed sale and leaseback of its assets via a deal with the banking giant.
This arrangement is intended to reduce the oil company’s debt and prevent its credit deterioration without hindering business operations, Ms. Rodriguez said.
“Moreover, we expect the sale to be only a small fraction of the actual amount of the said assets, and should Phoenix be unable to repurchase the assets, BDO will have a gain as the assets’ value is far greater than their loan exposure to Phoenix,” she added.
In the third quarter, BDO recorded a 16.5% increase in its attributable net earnings to P18.7 billion from P16.06 billion the prior year.
For the January-to-September period, its attributable net reached P53.9 billion, higher by 34.8% from P40 billion previously.
Ms. Rodriguez expects the bank’s full-year net income to hit P67 billion, accounting for 80% of her full-year forecast.
“We expect still strong growth in BDO’s core lending business, which will continue to be driven by high margins, as well as strong fees to be sustained in [the fourth quarter],” she said.
She added that investors should “buy” or consider BDO “as we continue to believe it is best positioned to capture the growth in the economy given its size, lending appetite, strong clientele, and well-balanced mix of digital and branch expansions.”
Mercantile Securities Corp. Head Trader Jeff Radley C. See said that due to the high rates set by the BSP, investors might choose BDO to invest in.
He said that last week, BDO had been trying to stay above P128.
“Next week, the stock might move sideways with a bearish bias due to the geopolitical tension that is happening globally,” he added.
He placed BDO’s support levels at P121.60 and P114.60 while its resistance levels at P132.20 and P135.80. — Abigail Marie P. Yraola
