Top Phl banks seen breaking profit targets

MANILA, Philippines - Hong Kong-based financial services group CLSA Asia-Pacific said it expects top Philippine banks Banco de Oro Unibank Inc. (BDO), Metropolitan Bank & Trust Co., Bank of the Philippine Islands (BPI) and Security Banking Corp. to break their respective profit targets this year.

In a report, the financial giant majority owned by Credit Agricole, France’s largest retail banking group, said the Philippine banking sector’s 18.8 percent loan growth figure (net of reverse repurchase agreements) as of May was running ahead of its original forecast.

“All told, we are comfortable with our earnings forecast for all banks in our coverage,” it said.

CLSA is a major brokerage, investment banking and private equity group in the Asia-Pacific markets, with more than 1,500 dedicated professionals across 13 Asian cities, aside from Dubai, London and New York.

In the report written by Philippine research head Alfred Dy, CLSA said that it expects the Sy family-owned BDO to earn P10.08 billion, 48 percent of which had been attained in the first six months based on net earnings adjusted for dividends associated with preferred shares.

Metrobank is projected to post a net income of P10 billion, 58 percent of which had been met in the first six months based on its adjusted earnings.

CLSA said BPI’s first-half net income already accounts for 49 percent of its 2011 net income target of P12.64 billion.

Meanwhile, the six-month net profit of Security Bank was already 57.85 percent of the bank’s 2011 net income forecast of P4.22 billion.

It was also pointed out that Rizal Commercial Banking Corp.’s six-month net profit is now equivalent to 50.71 percent of its full-year target of P3.97 billion.

It cited that Metrobank, Security Bank and BDO reported the most impressive numbers in the first semester, while Philippine National Bank (PNB) registered the least impressive.

“Note though that we expect PNB’s earnings to continue to recover in the coming quarters,” the report added.

PNB’s net income in the first semester hit only 35 percent of CLSA’s full-year bottom line target of P3.29 billion for the bank. Dy noted, however, that PNB’s second quarter earnings were 2.62 times higher than its first-quarter performance.

“Nonetheless, despite ongoing debt issues in Europe plus lukewarm economic growth prospects in the United States, we believe that our existing loan growth forecasts of 14 percent in 2011, 16 percent in 2012 and 18 percent in 2013 seem realistic for the time being,” the report said.

The report added it remains to be seen whether strong year-to-date loan growth figure in the electricity, gas, and water sector could be sustained in the coming quarters.

“Of course, the long-term prospects for loan growth are great given low outstanding loans to GDP (gross domestic product), loans to deposits, and NPL (non-performing loan) ratios,” CLSA said.

CLSA estimated that for Public-Private Partnership (PPP) projects, potential debt financing needs would hit about P73.77 billion (roughly $1.68 billion). For the power sector, it estimated that an additional 4,000 megawatts of new capacity is needed by 2020.

“Assuming cost of $2.5 million per MW and 70 percent debt financing, we estimate that potential financing needs could amount to as much as P308 billion. Of course, this still does not take into account the ‘multiplier effect’ to the economy plus additional capex (capital expenditure) of corporations, which are needed to be undertaken to fully serve the Philippines’ huge and still growing population base,” the CLSA report added.