February 10, 2014

BPI nets P18.8b for 2013

Yesterday, Bank of the Philippine Islands (BPI, Buy) disclosed that its net income grew15% YoY to P18.8bin 2013.This exceeded our P16.8b forecast and yields an RoE of 18% and RoA of 1.9%. The increase in earnings was driven by the 10% growth in net interest income and 11% rise in non-interest income.

Furthermore, opex growth was tempered at 7% YoY. The bank’s total assets and loans grew21% toP1.2tandP635b, respectively.Meanwhile, deposits grew 23% to P989b driven by the 40% growth in CASA deposits. The bank has also taken steps to insulate its investment portfolio from rising interests as it reduced its held-for-trading and available-for-sale holdings by 28% YoY.

Our Take: BPI’s 2013 earnings came ahead of our forecasts on the back of stronger than expected non-interest income and tempered opex growth. With a revamped management, BPI has started to show a renewedfocus on growing its assets aggressively which, in our view, is a break from recent tradition.

We view these moves positively, considering that BPI has substantially grown its low-cost deposits and has recently raised P25b in fresh capital via stock rights offering. We expect BPI to continue increasing its leverage in 2014 in order to drive core earnings growth and compensate for the expected weakness in trading income. - WealthSec