MAYBANK ATR Kim Eng has recommend to investors the purchase of stocks of banks that have aggressive loan growth, strong capital and have plotted expansion plans this year.
Maybank analysts Katherine Tan and Arabelle Maghirang in their research note on the Philippine banks said their top picks were BDO Unibank, Metropolitan Bank & Trust Co. (Metrobank), Security Bank Corp., EastWest Bank and Rizal Commercial Banking Corp. (RCBC).
BDO Unibank was upgraded to buy, as the bank’s aggressive growth strategy has resulted in better earnings performance. BDO has the largest branch network in the country.
“With return-on-equity [ROE] estimated to reach 14.1 percent this year from an estimated 13.6 percent in 2014, and with operating metrics narrowing versus those of Bank of the Philippine Islands [BPI], we valued it at the latter’s mean multiple of 2.3 times price to book value,” the report said.
Maybank recently upgraded Metrobank to “buy” as valuations are undemanding. It said the widely anticipated stock-rights issuance of Metrobank should eventually remove the overhang on MBT’s share price.
Maybank has reiterated its recommendation on Security Bank Corp., RCBC and EastWest Bank.
Maybank said Security Bank continues “to have the best asset quality in its universe.”
“Its stronghold in corporate lending could get further support from the venture into the consumer market,” Maybank said, adding that Security Bank plans to increase the consumer loans to a third of its loan book from the current 6 percent.
Its capital ratio is more than adequate to support this strategy with 2015 forecast common equity Tier 1 of 13 percent. Security Bank targets to increase fee income, helped by its joint venture with Hong Kong’s FWD Life for bancassurance business.
The year 2015, would be a better year for RCBC, after the strategic investment of Cathay Financial Group into the bank. “With fresh capital of P7.96 billion, this should enable RCBC to expand its risk assets and boost its loan and investment portfolio,” it said.
Despite the small asset size, EastWest was able to capitalize on consumer-loan growth with double-digit net-interest margins. EastWest took advantage of the boom in car sales, helped by its various tie-ups with car dealerships.
Auto loans jumped 47 percent last year, outpacing the industry’s 14-percent rise.
EastWest continues to be the fifth largest bank in credit-card receivables, after BDO, BPI, Metrobank and Citibank.
“We maintain our hold recommendation on BPI, China Banking Corporation, Philippine Business Bank, Philippine National Bank and Union Bank of the Philippines,” Maybank research added.