November 05, 2014

BPI nets P12.8b in 9M14

In a disclosure to the Exchange, Bank of Phil. Islands (BPI, Buy) said its 9M14 net income fell 19% YoY to P12.8b mainly due to the absence of extraordinary trading gains that boosted earnings last year. BPI’s 9M14 results translate to RoE of 13.4% and RoA of 1.4%. Loans grew 28% YoY to P702b while deposits rose 17% YoY to P1.0t. This fuelled the 15% YoY rise in net interest income. Non-interest income declined 17% YoY to P14.8b due mainly to lower securities and FX trading gains.

Non-interest income would have increased 7% YoY if trading gains were excluded. Operating expenses increased 13% owing to the bank’s investments in technology and higher manpower count. Nonetheless, cost-to-income ratio was steady at 53%. The bank’s NPL ratio continued to improve to 1.8% vs. 2.1% a year ago, while NPL cover was at 107%. The bank’s Capital Adequacy Ratio (CAR) was at 15.7% while Common Equity Tier 1 (CET1) Ratio was at 14.9%

Our take: BPI’s 9M14 results are tracking below 2014 consensus estimates of P18.4b, accounting for only 70% of consensus full-year estimate. Nonetheless, BPI’s 3Q14 results represent a 28% YoY and 8% QoQ hikes, indicating some acceleration. The faster-than-expected loan growth also indicates the banks flexibility in deploying excess liquidity in its balance sheet and the additional capital that it raised via SRO earlier this year. We believe that the strong loan growth, along with the build-up of its investment portfolio and the upward repricing of loan rates should translate to faster growth of net interest income, which then should further drive core earnings. – WealthSec