Bank of the Philippines Islands (BPI) \u2013 Buy, Target Price of P154.90<\/strong><\/p>\n\n\n\n Security Bank Corporation (SECB) \u2013 Buy, Target Price of P122.43 The BSP\u2019s December 2024 bank lending data showed that outstanding loans of universal and commercial banks posted a notable 12.2% year-on-year (YoY) growth to end up at P13.1-Trillion. We note that this marks a 2-year high, and we expect demand for loans to improve further as interest rates continue to decline (our forecast is 50bps this year and 100bps next year).<\/p>\n\n\n\n The growth was driven by a combination of expansions from both Production by Economic Activity and Consumer Loans. For the Production by Economic Activity segment, several drivers namely, wholesale and retail trade, repair of motor vehicles and motorcycles (WRT) expanded by 10.1%, followed by Electricity, Gas, Steam, and Air-conditioning Supply (EGSA) by 14.2%, Transportation and storage (T&S) by 29.2%, Real estate activities (REA) by 9.2%, Construction by 12.6% and Manufacturing by 7.4%. These components already accounted for more than half of the P1.4-Trillion growth in outstanding loans. This was then supported by an even faster expansion of Consumer loans, driven primarily by Credit Cards which posted a staggering growth rate of 29.4% followed by Motor Vehicle Loan\u2019s (MVL) 19.5% and lastly, Salary-Based General Purpose Consumption Loan by 16.5%.<\/p>\n\n\n\n We note that the BSP started its rate-cutting cycle in August last year, reducing borrowing costs by a total of 75bps already by end-2024 to end up at 5.75%. Although this would result in the lowering of lending rates for banks, we reiterate that they have already started to implement strategic shifts, anchored on volume-driven growth as opposed to the NIM-driven expansion that they have executed in previous years. <\/p>\n\n\n\n We therefore maintain our BUY ratings for our Top picks in the sector (BPI, Target Price: P154.90 \/ SECB, Target Price: P122.43 \/ PNB, Target Price: P32.80) as we expect that their shift in strategy would translate to higher earnings for shareholders moving forward.<\/p>\n\n\n\n
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Philippine National Bank (PNB) \u2013 Buy, Target Price of P32.80<\/strong><\/p>\n\n\n\nBorrowing continues expansion<\/h3>\n\n\n\n
Loan growth is the name of the game<\/h3>\n\n\n\n
Net Interest Margin (NIM) expansion is out, volume growth is in<\/h3>\n\n\n\n