{"id":331716,"date":"2025-02-28T01:00:20","date_gmt":"2025-02-27T17:00:20","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=331716"},"modified":"2025-02-28T01:05:42","modified_gmt":"2025-02-27T17:05:42","slug":"stock-in-focus-philippine-national-bank-pnb-28-feb-2025-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-philippine-national-bank-pnb-28-feb-2025-by-ap-securities\/","title":{"rendered":"Stock in Focus: Philippine National Bank (PNB) – 28 Feb 2025 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>28 Feb 2025<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 36.70<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Despite the recent run-up in PNB that saw its price surge by 16.4% year-to-date (YTD), PNB is still trading at a deeply discounted P\/B ratio of 0.23. This is significantly lower than the 0.42x average P\/B of similarly sized banks (excluding the newly-index CBC). With this in mind, we believe that PNB is still worth a BUY despite the inefficiencies that we noted above (low ROE, low LDR). Given this undervaluation, we keep PNB as our top banking pick outside of the Index Banks (BDO, MBT, BPI, CBC).<\/p>\n\n\n\n

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

Earnings exceed expectations<\/strong><\/p>\n\n\n\n

PNB\u2019s net income in 2024 reached P21.2-Billion (+17.9% YoY), surpassing the consensus forecast of P18.7-Billion, driven by NIM expansion and padded by trading profits and gains from the disposal of foreclosed assets. Earnings were also boosted by lower provisioning (-34.7% YoY) and effective management of operating expenses (49.6% cost-to-income ratio, which is one of the lowest in the industry).<\/p>\n\n\n\n

PNB\u2019s secret sauce for NIM expansion<\/strong><\/p>\n\n\n\n

PNB bucked the industry trend of NIM compression, with its YE24 NIM widening by 27bps to 4.50%. The only other major bank to accomplish this was BPI, and their NIM only expanded by 22bps to 4.31%. The bank attributed this to growth in higher-yielding segments like credit card and auto loans, as well as a 6.5% YoY increase in low-cost CASA deposits which led to lower funding costs. CASA deposits now account for 84.4% of total deposits, up from 82.9% last year.<\/p>\n\n\n\n

Loan growth could be better<\/strong><\/p>\n\n\n\n

PNB\u2019s loan book grew by only 3.6% YoY, significantly trailing the industry\u2019s 12.5%
growth last year. The bank\u2019s core business of corporate lending expanded by 4.3% YoY, while its second largest segment, housing loans, shrank by 3.3% YoY. Credit card loans, on the other hand, surged by 18.7% to P16.5-Bn. These growth rates are again well-below the industry, with other banks reporting low- to mid-teens growth in corporate lending and >20% growth in credit card lending.<\/p>\n\n\n\n

Room for improvement on ROE side<\/strong><\/p>\n\n\n\n

The bank\u2019s return-on-equity of 10.39% (up from 9.95% last year) again significantly trailed its peers, with industry ROE generally ranging between 12-15%. We assume that this is due to PNB failing to deploy its deposits, with the bank\u2019s loans-to-deposit ratio (LDR) being abysmally low at 64.4%. This is something that we hope the bank will address before interest rates go down in earnest, so that they will be able to lock in higher yield loans and maintain their impressive NIMs.<\/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>