{"id":328123,"date":"2024-05-30T22:14:48","date_gmt":"2024-05-30T14:14:48","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=328123"},"modified":"2024-05-30T22:14:51","modified_gmt":"2024-05-30T14:14:51","slug":"stock-in-focus-bdo-unibank-inc-bdo-30-may-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-bdo-unibank-inc-bdo-30-may-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: BDO Unibank, Inc. (BDO) – 30 May 2024 by AP 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>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>30 May 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 180.20<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Upon updating our model forecasts and assumptions, our Target Pricr for the stock has risen to P180.20 from P169.70, representing significant upside of 38.4%. <\/p>\n\n\n\n

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

Trying to catch the dwindling drops<\/h3>\n\n\n\n

Based on our recent calculations, the level of excess liquidity in the banking system, while still at relatively normal levels, appears to have tightened for two consecutive months now. When assessing the total amount that has been siphoned using the BSP\u2019s liquidity facilities (term and overnight deposits, overnight reverse repurchases and BSP bills) relative to the minimum reserve requirement on deposits, we noted that the ratio for the month of February (most recent month with complete deposit data) laid at 87.0%, lower than the 97.0% from the prior month and the aggregate 101.5% that we saw in 4Q23. <\/p>\n\n\n\n

Receding liquidity levels in the industry would mean that banks would have to compete harder for any available funding, especially as loan growth begins to pick up, potentially pushing them to resort to offering higher cost time deposits in order to draw in depositors\u2019 interest. This outlook is further supported by comments made by the BDO management team during their 1Q24 briefing wherein they stated that time deposits would likely continue to make up the bulk of banks\u2019 funding this year as a result of the tighter competition in the industry.<\/p>\n\n\n\n

Time deposits are still a thorn on banks\u2019 sides<\/h3>\n\n\n\n

Upon further examining various time deposit-related data, we also noted that the trajectory of time deposit rates has indeed continued to go up despite policy rates being stagnant for almost a year now. As of April 2024, the average time deposit rate for all maturities sat at 4.41%, marking a YTD gain of 14bps while also being 22bps higher than year-ago levels. If the trajectory of the banking industry\u2019s liquidity levels continues to move downwards, then there may be further upside for time deposit costs in the next couple of months before the BSP starts to eventually cut rates.<\/p>\n\n\n\n

Weathering the storm<\/h3>\n\n\n\n

In light of this, we would therefore continue to prioritize names with solid funding profiles that would allow them to temper their deposit costs. BDO immediately comes to mind here given that the bank, despite also being subject to the same trends as the industry when it comes to time deposit migration, has nevertheless still managed to maintain a relatively strong CASA ratio (70%) when compared to its peers. This has therefore allowed the bank to therefore also keep deposit costs suppressed relative to its fellow big 3 banks.<\/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>