{"id":327821,"date":"2024-05-08T17:11:06","date_gmt":"2024-05-08T09:11:06","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=327821"},"modified":"2024-05-08T17:11:08","modified_gmt":"2024-05-08T09:11:08","slug":"stock-in-focus-philippine-national-bank-pnb-8-may-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-philippine-national-bank-pnb-8-may-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Philippine National Bank (PNB) – 8 May 2024 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>PNB<\/td><\/tr>
Company Name<\/strong><\/td>Philippine National Bank<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>8 May 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Hold<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 25.73<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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PNB\u2019s stock trades very cheaply at only 0.2x price-to-book ratio (PBR). Despite this, we would still recommend a HOLD however given the ongoing risks that remain with regard to asset quality and the trajectory of future provisioning.<\/p>\n\n\n\n

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

Earnings beat, but quality is questionable<\/h3>\n\n\n\n

PNB\u2019s earnings for the 1st quarter (1Q) 2024 surpassed analysts\u2019 expectations as they accounted for 32.3% of full-year projections. While we like how the recurring components of the bank\u2019s profits, namely net interest income and fees, continued to show steady growth alongside further OPEX tempering, we nevertheless are still a bit wary of the overall quality of the earnings beat. <\/p>\n\n\n\n

This is amidst the drastic reduction in provisioning which fueled much of the earnings performance, despite the fact that the bank\u2019s last reported NPL and NPL coverage ratios remained sub-par versus the industry\u2019s. Additionally, a further contributor to the beat was the 4.8ppt reduction in the bank\u2019s effective tax rate.<\/p>\n\n\n\n

Recurring core revenue continues upward march<\/h3>\n\n\n\n

Net interest income of P11.7-Billion saw upward expansion of 11.9%, driven by growth in the bank\u2019s loan portfolio alongside increased yields. On average, yields on loans were said to have increased by 47bps, while at the same time high funding cost sources were minimized, which therefore led to NIM accretion. <\/p>\n\n\n\n

The double-digit improvement in net interest income was diluted however by the 23.7% decline in fees which came in at P1.18-Billion, although it is worth noting that this figure was still up by 14.8% on a sequential basis. All in all, total core revenue (P12.9-Billion) was higher by 7.3%.<\/p>\n\n\n\n

Provisioning reduction is questionable<\/h3>\n\n\n\n

The real kicker in the earnings outperformance came from the significant decline in provisions that were booked for this quarter, down by 61.6% to only P619.8-Billion. We note that this is not even half of last year\u2019s provisioning expense. While the bank released a statement that the loan portfolio had \u201cfully recovered from the lingering effects of the pandemic\u201d, we note that as recently as 4Q 2023, PNB\u2019s NPL ratio of 6.26% was more than twice the industry\u2019s average while NPL cover of 88.5% was likewise also below that of other universal banks. <\/p>\n\n\n\n

Although non-performing loans (NPL) and NPL coverage figures for 1Q 2024 have not yet been released, we think that the likelihood is low that the bank\u2019s metrics would suddenly see a dramatic turnaround in the span of just one quarter. As such, we think that the lowering of provisions could be a risky move especially since we are still in a high-for-long interest rate environment.<\/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>