{"id":330193,"date":"2024-11-04T12:14:24","date_gmt":"2024-11-04T04:14:24","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=330193"},"modified":"2024-11-04T12:14:26","modified_gmt":"2024-11-04T04:14:26","slug":"stock-in-focus-bdo-unibank-inc-bdo-4-nov-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-bdo-unibank-inc-bdo-4-nov-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: BDO Unibank, Inc. (BDO) – 4 Nov 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>4 Nov 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 180.18<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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BDO sees the recent interest rate and reserve requirements ratio (RRR) cuts as a positive for loan growth moving forward, which should offset any margin erosion from net interest margin (NIM) contraction. However, despite early signs of recovery, the bank does not expect loan growth to truly pick up until interest rates start to stabilize next year. <\/p>\n\n\n\n

While waiting for this, BDO has opted to park its excess liquidity in its investment portfolio which now account for 22% of total assets. In general, the company\u2019s outline of its plans moving forward restored our optimism that BDO will be able to weather the upcoming industry weakness in banking. Coupled with the recent decline in share price which improved the upside to our Target Price of P180.18, we are hereby reinstating our BUY rating on BDO.<\/p>\n\n\n\n

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

BDO earnings slightly ahead for the quarter<\/strong><\/p>\n\n\n\n

BDO\u2019s 3Q 2024 net income of P21.2-Billion represented 26.4% of our 2024 forecasted earnings, while the 9M 2024 figures reached 75.5% of our full-year estimates. The bank\u2019s loan book expanded by 12.8% year-on-year (YoY), faster than the industry loan growth of 11.1% but behind its Big Three peers (BPI: +18.9%, MBT: +15.6%). <\/p>\n\n\n\n

We find that BDO\u2019s YoY corporate loan growth of 11.7% lagged behind BPI\u2019s +12.8% and MBT\u2019s +16.6%, while YoY consumer loan growth of 15.7% beat MBT\u2019s +12.8% but was dwarfed by BPI\u2019s +36.2% following the consolidation of Robinsons Bank into BPI\u2019s books. In terms of margins, BDO\u2019s NIMs contracted by 12bps to 4.23% in 3Q24, bringing YTD NIM down to 4.32% which is still better than BPI\u2019s 4.29% and MBT\u2019s 3.90%.<\/p>\n\n\n\n

It’s just an accounting thing<\/strong><\/p>\n\n\n\n

The bank attributed the shift in its NIMs and cost of deposits to changes in its accounting treatment of incidental costs like documentary stamp taxes (DST) and seller\u2019s commissions which is now included in the computation of credit costs and cost of deposits, whereas before they were folded into the company\u2019s operating expenditures.<\/p>\n\n\n\n

CASA is king<\/strong><\/p>\n\n\n\n

Despite the continuous decline in BDO\u2019s CASA ratio (69.0% as of 3Q24 vs 71.6% as of 2023), it still has the highest CASA ratio among the Big Three (BPI: 63.0%, MBT: 62.3%). As a result, the bank\u2019s cost of deposit remained remarkably low at 1.97%. BDO attributed this to its massive branch network of 1,746 branches, which allows it to be where the depositors are. The bank plans to build on this further by building more branches in underserved areas under its BDO Network Bank, which requires less manpower and a smaller footprint, while dialing back on the branch expansion of its flagship BDO branches.<\/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>