Bank stocks forecast to outperform peers

The local banking sector is poised to outperform the market in 2022 as earnings accelerate with the continued reopening of the Philippine economy despite prevailing geopolitical risks and rising inflationary pressures around the world, according to BDO Securities.

In fact, BDO Securities said Bank of the Philippine Islands (BPI), Metropolitan Bank & Trust Co. (Metrobank) and Security Bank Corp. will do better this year relative to the benchmark Philippine Stock Exchange index.

Key catalysts include improving mobility trends, recovering consumer and business sentiments, gross domestic product growth and rising loans and interest rates, the brokerage house said in a March 14 report to clients.

The favorable economic backdrop would push up demand for loans and fees while lenders look to scale down provisions for bad loans.

BDO Securities noted that provisioning costs are forecast to come down in 2022 given the three banks had established “adequate” and above-industry provisions at the end of last year.

“We have turned more positive on the sector, recently upgrading Security Bank to ‘buy,’ while reiterating our ‘buy’ on BPI and Metrobank,” BDO Securities said.

Their share prices also remained attractive with the sector trading at a 33 percent discount to its historical average, it added.

Strong earnings growth

For 2022, BDO Securities forecast BPI earnings growth at 49.5 percent while Metrobank and Security Bank would grow profits by 40.3 percent and 28.8 percent, respectively.

Higher fees would also be driven by an upswing in transaction volumes coupled with growing demand for wealth management and investment banking services.

“Continued investments in technology and rationalization of branches are also expected to increase operating efficiencies and aid earnings growth for banks over the medium to long term,” BDO Securities added.

Threats to the sector remain such as a resurgence of vaccine-resistant COVID-19 infections that would trigger fresh movement curbs. BDO Securities also warned that geopolitical uncertainties may “aggravate inflation and weigh on consumer and business sentiment.”

It noted that the geopolitical crisis caused by Russia’s invasion of Ukraine “complicates the planned withdrawal of monetary support.”

Nevertheless, it said the Bangko Sentral ng Pilipinas continued to signal “policy normalization” by the second semester of 2022.