Higher profits provide a boost to BDO stock

THE Sy-led BDO Unibank, Inc. was one of the most actively traded stocks last week as market players reacted to its first-quarter earnings report.

A total of 10.038 million BDO shares worth P1.341 billion exchanged hands on the trading floor from April 22 to April 26, data from the Philippine Stock Exchange showed.

On a week-on-week basis, its share price was up by 1.52% to P134 last Friday from its April 17 closing price of P132 apiece. Year to date, the bank’s share price was up 5.51%.

“The market is obviously recognizing the potential of BDO going forward as easing inflation posits sustained consumer spending is propped even more by election-related spending. Growth is evidenced by its [first-quarter] result,” Philstocks Financial, Inc. Research Head Justino B. Calaycay, Jr. said in an e-mail.

Mr. Calaycay added that as Bangko Sentral ng Pilipinas (BSP) is marking its commitment to a reduction of reserve requirements “as merely a question of time,” the bank’s leverage presents the foundation for robust and sustained margins.

Unicapital Securities, Inc. Certified Securities Representative Cristopher Adrian T. San Pedro noted first-quarter earnings result was “better than market expectations” and that it was a “buy on news” scenario.

“[BDO] also capped another milestone as the first Philippine bank to surpass the P3-trillion mark in total assets,” Mr. San Pedro said.

BSP Governor Benjamin E. Diokno earlier said a cut in benchmark interest rates, currently at the 4.25-5.25% range, will be considered at the May 9 policy review of the Monetary Board. He also floated the possibility of a reduction in big banks’ reserve requirement ratio, which is currently at 18%.

As of the first quarter this year, BDO’s assets were at P3.014 trillion, 8% higher than P2.797 trillion in last year’s comparable three months.

Further, its net income attributable to parent grew by 66% to P9.8 billion from P5.9 billion in the same period last year.

This puts BDO on track to hit its full-year profit guidance of P38.5 billion, which if realized would be 17.7% higher than the actual P32.7-billion net income it booked in 2018.

In a press conference on April 22, BDO President and Chief Executive Officer Nestor V. Tan attributed the bank’s first-quarter income growth to the continued expansion of its core banking operations, recovery of trading gains, and strong non-interest income.

Unicapital’s Mr. San Pedro expects BDO’s growth this year to be driven by its net interest income, fee income, and the “sustained normalization” of its trading and foreign exchange gains.

“We have a conservative target of at least P37.5-billion net income for BDO this year. We expect BDO to remain resilient despite the uncertainties challenging the market environment,” Mr. San Pedro said.

He expects the BDO stock to consolidate between the support and resistance levels of P130 and P136.4, respectively, with the possibility of testing between P138 and P140 “if it holds above P134 in the short term.”

For Philstocks’ Mr. Calaycay: “Strong support is P127 with an immediate upside potential ranging from a low of P137 to as much as P145-P150 over the medium- to long-term.” — MAM