{"id":322874,"date":"2023-04-28T02:37:51","date_gmt":"2023-04-27T18:37:51","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=322874"},"modified":"2023-04-28T02:37:52","modified_gmt":"2023-04-27T18:37:52","slug":"stock-in-focus-bdo-unibank-inc-bdo-28-apr-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-bdo-unibank-inc-bdo-28-apr-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: BDO Unibank, Inc. (BDO) – 28 Apr 2023 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>BDO<\/td><\/tr>
Company Name<\/strong><\/td>BDO Unibank Inc.<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>28 Apr 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 150.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

We set a target price (TP) of Php150.00 for BDO based on a price to book ratio (PBR) of 1.53x, the average of BDO\u2019s own historical PBR for 2019 (pre-pandemic year) of 1.68x and 2023F (4th year of pandemic) of 1.37x. This offers a potential share price upside of 11.1% and total return of 13.3% wherein our 2023F dividend yield estimate of 2.2% is included. We rate BDO a BUY.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

1Q 2023 net income up 41% year-on-year (yoy)<\/strong><\/p>\n\n\n\n

BDO\u2019s 1Q 2023 net income grew by 41% year-on-year (yoy) to Php16.5bn, well in line with consensus estimate, driven by broad-based top line growth. Net interest income (NII) rose by 28% yoy to Php43.4bn in 1Q23 as interest income increased by 45% yoy to Php53.9bn due to 8% loan growth and 126 bps rise in asset yield. The growth in NII would have been larger if the funding mix did not change. Apparently, the share of more costly time deposits in total deposits grew by 9.6 percentage points (ppts) yoy to 24% as of end-1Q23 while low-cost savings dropped by 8.9 ppts yoy to 62%.<\/p>\n\n\n\n

Net interest margin (NIM) uptrend may be sustained<\/strong><\/p>\n\n\n\n

NIMs have been treading higher each quarter for five quarters in a row, reaching 4.58% in 1Q23. Note that the series of policy rate hikes implemented by the BSP are gradually being reflected in customer loans but BDO has been extra careful in the timing and extent of adjustments. With the prevailing macroeconomic uncertainties, BDO is expecting NIMs to remain steady but we believe the uptrend will be sustained as we also count on trading and investment securities to keep growing faster than loan book.<\/p>\n\n\n\n

Conservative loan growth target to protect asset quality<\/strong><\/p>\n\n\n\n

The asset quality of BDO has consistently improved since 2Q 2021, when non-
performing loans (NPL) ratio reached 3.12%. It appears to have stabilized recently at nearly 2% in 4Q22 and 1Q23. BDO sounds like it is playing safe by targeting a loan growth of 8% to 10% for FY23F, which is not as aggressive as its peers. While the high interest rate environment is good for NIMs, it is associated with risks of delinquencies and defaults which make BDO very cautious.<\/p>\n\n\n\n

Earnings outlook<\/strong><\/p>\n\n\n\n

All told, we are looking at a net income of Php67.2bn\/Php77.8bn for FY23F\/FY24F, which is higher by 17.7%\/15.7% yoy. The tempered FY23F growth (compared with 1Q23\u2019s 41%) is simply because of the higher base period in the second half. Our forecasts show FY23F loan and deposit growth at 9% and 14% yoy, respectively, bringing NII higher by 14% yoy. Adding support is fee income, which we expect to grow by 22% in FY23F. Lastly, we forecast FY23F\/FY24F operating expenses to grow by 17%\/13% on higher volume-related costs and more IT spending.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>