As loan growth continues to range within the high single digits, we believe that banking names with high asset yield generation and solid cost management will be able to outperform their peers. In this regard, we would continue to recommend BDO<\/strong>. Among banks with available data on Bloomberg, BDO\u2019s yield ranked at the 2nd highest at 5.8%, exceeded only by CHIB. We note however, that BDO\u2019s CASA ratio which lies at the low to mid 70\u2019s range, is superior to the latter\u2019s which would greatly promote Net Interest Margin (NIM) outperformance. <\/p>\n\n\n\n BPI<\/strong> on the other hand, while only having a yield of 5.7%, should see this number jump in the coming quarters as it places continued focus on consumer loans. Additionally, BPI also has the benefit of generating industry-beating loan growth. Based on our initial estimates, we see BPI\u2019s 2023 loan growth coming in at around 9.5% with potential to climb to double digits as it continues to double down on retail and agency banking initiatives.<\/p>\n\n\n\n Overall lending activity for banks further slowed in July 2023, as expansion in total loans net of RRPs dipped to 7.7% YoY from the 7.9% seen in the month prior. The downtick in growth is attributable mainly to the impact of monetary policy, as all loan categories across the board were impacted. <\/p>\n\n\n\n As was seen in previous months, consumer loans remained the strongest contributor as the segment continued to increase north of 20%, albeit slower than last month. Performance was driven mainly by the credit card segment which bucked the overall trend as expansion continued to pick up pace (from 29.3% to 29.8%). On the other hand, loans for economic activity continued to hover at the low 6% range which suggests that a large portion of the overall corporate loan book likely remains allocated towards working capital loans.<\/p>\n\n\n\n On the flipside, amidst muted loan growth we note that some key factors may signify potentially more tempered interest expense growth in the coming months. The growth rate in time deposits, while still high, has shed 3.7ppts in July relative to June, while also having declined outright by 1.6% MoM. <\/p>\n\n\n\n Additionally, while there were previous concerns regarding the BSP\u2019s shift to a variable rate auction as this would speed up the transmission of monetary policy (potentially accelerating the repricing of loans downwards when a rate cut occurs), the increased hawkishness of the central bank could very well delay these rate cuts even further. <\/p>\n\n\n\n Banks would instead be able to reap the benefits of such an arrangement, which would revolve primarily around the promotion of more rational pricing of time deposits. This should help to further dissuade banking players from setting time deposit rates at exaggerated levels, which would be a boon for overall industry NIMs.<\/p>\n\n\n\nJuly lending loses more steam<\/h3>\n\n\n\n
Some potential respite on interest expenses<\/h3>\n\n\n\n