Banking stocks are expected to outperform their peers

The local banking sector is poised to outperform the market in 2022 as earnings accelerate as the Philippine economy continues to reopen despite ongoing geopolitical risks and rising inflationary pressures around the world, according to BDO Securities .

In fact, BDO Securities said Bank of the Philippine Islands (BPI), Metropolitan Bank & Trust Co. (Metrobank), and Security Bank Corp. would do better this year relative to the benchmark of the Philippine Stock Exchange.

Key catalysts include improving mobility trends, picking up consumer and business sentiment, growing gross domestic product, and rising lending and interest rates, the brokerage said in a report. from March 14 to customers.

Favorable economic conditions would increase demand for loans and fees as lenders seek to reduce provisions for bad debts.

BDO Securities noted that provisioning costs are expected to decline in 2022 given that the three banks had established “adequate” and industry-beating provisions late last year.

“We have become more positive on the sector, recently upgrading Security Bank to ‘buy,’ while reiterating our ‘buy’ on BPI and Metrobank,” BDO Securities said.

Their share prices also remained attractive, with the sector trading at a 33% discount to its historical average, he added.

Strong profit growth

For 2022, BDO Securities forecast BPI earnings growth of 49.5% while Metrobank and Security Bank would increase earnings by 40.3% and 28.8%, respectively.

Higher fees would also be driven by increased trading volumes coupled with growing demand for wealth management and investment banking services.

“Continued investment in technology and streamlining of branches should also increase operational efficiency and support growth in bank earnings over the medium to long term,” added BDO Securities.

Threats are hanging over the sector, such as a resurgence of vaccine-resistant COVID-19 infections that would trigger further movement restrictions. BDO Securities also warned that geopolitical uncertainties could “aggravate inflation and weigh on consumer and business sentiment.”

He noted that the geopolitical crisis caused by Russia’s invasion of Ukraine “complicates the planned withdrawal of monetary support”.

Nonetheless, he said the Bangko Sentral ng Pilipinas continued to report “policy normalization” by the second half of 2022.

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