We currently have an underweight rating on the entire banking sector, and our picks now lean more towards the Next Three biggest banks CBC, PNB, and SECB. But if we must have a Big Three pick, we will go for BPI due to its cost-to-income ratio (CIR) lead. Its net interest margins, despite being slightly lower than BDO\u2019s, also remains relatively robust. Deposit and loan growth are also boosted by its integration of Robinsons Bank, which allows it to leapfrog its peers in terms of growth. <\/p>\n\n\n\n
With this in mind, we reinstate our BUY rating for BPI with a Target Price of P155.60.<\/p>\n\n\n\n
Philippine banks are generally pushing for digitalization to cut costs, but the progress has been slow and results have been spotty at best. BDO, for example, is still relying on its massive branch footprint to be accessible to depositors and this is keeping its cost-to-income ratio (CIR) above 50%. <\/p>\n\n\n\n
On the other hand, BPI is arguably becoming the most digital out of the Big Three banks mainly due to its ties with leading fintech firm GCash. This is reflected in its CIR having the most convincing downtrend among its peers and remaining below 50% since 2022. We expect this trend to continue and for BPI to maintain this lead over BDO and MBT in the coming years.<\/p>\n\n\n\n
On the \u201cNext Three\u201d side of things, we note that CBC is now trading above the consensus Target Price of P63.50 which warrants a HOLD rating. <\/p>\n\n\n\n
Comparing the remaining two, PNB and SECB, using the same method we used for the Big Three, CBC leads in terms of lowest CIR but PNB has the most convincing downtrend due to improved operational efficiencies. And while its NIM is lower than that of SECB, it is important to note that PNB\u2019s NIM actually widened by 20bps QoQ in 3Q 2024 while SECB\u2019s narrowed by 30bps during the same period. <\/p>\n\n\n\n
As such, we rate PNB as our top Next Three banking pick with a Target Price of P36.70.<\/p>\n\n\n\n