20140616-Maybank_KERPL-Philippines_Banks_21页_359kb

报告摘要

Summary of Philippines Banks Analysis

Core Content

The report provides an analysis of the performance and outlook for the Philippine banking sector in the first quarter of 2014, highlighting both the strengths and challenges faced by banks in the context of economic and regulatory changes.

Main Points

1. Earnings Performance

1Q14 Earnings: Consolidated net earnings for the banking universe dropped 48% YoY to PHP22b, mainly due to a sharp decline in treasury gains (down 85% YoY to PHP5.9b).
Loan Growth: Loan demand was stronger than expected, growing 25.2% YoY, which helped offset the decline in trading and FX gains.
Fee-Based Income: Fee-based earnings increased 14.2% YoY, contributing to the overall earnings support.

2. Loan Demand and Growth

Sector Growth: Borrowings from the production sector grew 18.1% YoY, with notable growth in sectors like construction (46.5%), electricity, gas, and water (34.7%), and real estate (19.8%).
Consumer Loans: Consumer lending saw a 11.7% growth in March, with significant increases in credit card receivables (6.9%), auto loans (12.5%), and personal/salary loans (33.9%).
Loan-to-Deposit Ratio: The ratio fell to 66.1% from 73.4% in 1Q13, indicating improved liquidity management.

3. Interest Income and Cost Management

Interest Income: Increased 15.7% YoY, driven by loan growth and higher yields from deposits.
Deposit Growth: Customer deposits rose 39% YoY, with low-cost CASA (Core Banking Accounts) up 36% and time deposits up 45%.
Operating Costs: Banks managed operating costs conservatively, with operating expenses rising only 2.5% YoY. The cost-to-income ratio was 57.4% in 1Q14, up from 44.9% in 1Q13.
Provisions: Provisions for credit losses are expected to fall 40% in FY14, reflecting solid asset quality and low NPL ratio (2.16%).

4. Investment and Capital Management

MTM Losses: Mark-to-market (MTM) losses on AFS increased 16% QoQ to PHP21.3b, reducing net worth by 3%.
Basel III Impact: MTM losses are now deducted from qualifying capital, affecting CET1 ratios. For example, UBP’s CET1 ratio would have been 13.8% without MTM losses, but it was reported at 10.9%.
Capital Adequacy: Average CET1 ratio is estimated at 13% for FY14 and 13.4% for FY15. Banks are building buffers above the 8.5% minimum requirement.

5. Industry Outlook

Consolidation Trends: The report suggests that Basel III implementation and ASEAN banking integration will drive industry consolidation.
Buy Recommendations: Banks with strong fundamentals and less exposure to volatile investment portfolios are recommended for a BUY. These include SECB, RCB, PNB, and PBB.
Foreign Bank Entry: The approval of Senate Bill 2159 allows foreign banks to own up to 100% of local banks, potentially leading to consolidation and market expansion. However, foreign banks may face constraints due to capital limits and local regulations.

Key Information

1Q14 Earnings Decline: The sharp drop in earnings was primarily due to treasury gains and trading and FX losses.
Loan Growth: Loan growth outperformed expectations, with BDO, MBT, and BPI dominating the market.
Interest Spread: The spread between lending rates and deposit rates widened, indicating improved earnings quality.
AFS Management: Many banks are reclassifying AFS to HTM to reduce MTM volatility, though SECB and EW have less exposure to this risk.
Regulatory Impact: Basel III and the potential for foreign bank entry are key drivers of capital adequacy and consolidation.

Conclusion

Despite the decline in earnings and volatility in AFS, the Philippine banking sector remains fundamentally strong with robust loan growth, solid asset quality, and adequate capital ratios. However, interest rate volatility and foreign bank entry pose ongoing challenges. The report recommends BUY for banks with strong fundamentals and less exposure to volatile investments, while remaining cautious about potential MTM losses and capital adequacy under Basel III.