汇丰银行-亚太地区-银行业-菲律宾银行业：当心流动性紧张-2019.2.20-24页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.MCI(P)065/01/2019 MCI(P)016/02/2018 Issuer of report:The Hongkong and Shanghai Banking Corporation Limited,Singapore Branch View HSBC Global Research at:https:/ Risks of rising interest rates and weakening peso have abated,but watch out for liquidity tightness Be selective as sector ROA under pressure and valuations are not particularly cheap Prefer banks with strong deposit franchises and stronger growth prospects MBT(rated Buy)most preferred Persisting liquidity tightness.We believe that the risks of rising interest rates and a weakening peso have abated,on the back of normalisation of inflation and a less hawkish Fed.So while the risks stemming from rising inflation and interest rates affecting customers servicing ability have reduced,we are still cautious on the sector.This is due to the imminent slowdown in economic growth(from 2018s 6.2%to c6.0%in 2019e per HSBCs economists forecast),driven by weaker private investment and government spending,and a persisting tightness in liquidity(coming from a widening current account deficit).Underperforming YTD.Banks share price performance has also lagged,underperforming the broader market PFINC+0%YTD vs PCOMP+7%.As such,we are selective on stocks within the sector,due to:1)ROA pressure(from 1.24%in 2017 to 1.06%by the end of 2020e),driven mostly by higher credit costs(mainly coming from credit cost normalisation),as revenue ROA remains fairly stable;and 2)we believe sector valuations are not particularly cheap.The sector is currently trading at 1.3x 2019e PB vs ROE of 9%(vs historical averages of 1.7x PB vs 13%ROE).On PE,the sector is currently trading at 16x 2019e,which is almost at+1SD above its 10-year historical mean of 14x.MBT still most preferred.Within the sector,we prefer larger banks that are less susceptible to rising funding costs,have a strong balance sheet(in terms of low NPL ratios,higher reserve coverage and ample capital),and stronger EPS growth prospects MBT(rated Buy)is best positioned,in our view.Tweaking EPS by c2%in 2019/20e.We adjust our sector average 2019-20e EPS marginally by c2%,from slightly better loan growth,lower credit costs and NPL ratios.As such,we have adjusted our target prices by-7%to+9%(details on page 10).Our 2019-20e EPS estimates are 13-18%lower than consensus on average due to our more conservative assumptions on fee income and non-interest income.20 February 2019 Xiushi Cai*Banks Analyst The Hongkong and Shanghai Banking Corporation Limited,Singapore Branch .sg+65 6658 0617 Kar Weng Loo*Senior Banks Analyst,Southeast Asia The Hongkong and Shanghai Banking Corporation Limited,Singapore Branch .sg+65 6658 0621 Mukul Yadav*Associate Bangalore *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Philippine Banks Equities Commercial Banks Philippines Philippines bank stocks sector table Company Ticker Rating Share price*PHP _ TP(PHP)_ Upside/EPS growth(%)_ PBV(x)_ _ ROE(%)_ _PE(x)_ Market cap (USDm)Avg trdg value(USDm)Old New Downside (%)19E 20E 19E 20E 19E 20E 19E 20E Banco de Oro BDO PM Reduce 133.50 94.10 101.30-24.1 6.4 5.9 1.7 1.6 9.3 9.1 18.8 17.7 11.2 5.2 Bank of Phil Islands BPI PM Hold 89.20 82.60 87.90-1.5 4.2 4.0 1.5 1.4 9.4 9.2 16.6 15.9 7.7 3.3 Metrobank MBT PM Buy 80.40 98.60 104.40 29.9 6.6 13.0 1.0 0.9 8.5 8.9 12.0 10.6 6.1 5.2 UnionBank UBP PM Hold 62.00 69.60 64.70 4.4-15.0 8.4 0.8 0.8 6.8 7.1 12.2 11.2 1.4 0.1 Security Bank SECB PM Hold 173.10 149.40 163.40-5.6 0.9 9.8 1.1 1.1 7.5 7.8 15.3 13.9 2.5 2.1 Sector avg 1.3 1.3 8.7 8.8 15.9 14.8 Source:Bloomberg,HSBC estimates.*Priced as of close on 18 Feb 2019 Watch out for liquidity tightness Equities Commercial Banks 20 February 2019 2 Share price performance The share price performance of Philippine banks was dismal last year the PFINC Index was down 20%compared with PCOMPs-11%.Even regionally,they were the worst performers among the ASEAN banks(-23%vs Asia average of-13%),driven by outflows from global external factors,and concerns mostly on elevated domestic inflation,a widening current account deficit and the weakening peso.This time,share prices have seen a slight rebound,just two months into the year,but are still underperforming the broader market PFINC+0%YTD vs PCOMP+7%.In our last sector report,Philippine Banks:Near-term headwinds,dated 28 Nov 2018,we highlighted the near-term macro headwinds that we thought would impact sector earnings.These included:Elevated inflation levels and rising interest rates Current account deficit leading to tightening liquidity Weakening peso Near-term earnings outlook What has changed?We believe that the risks of rising interest rates and a weakening peso have abated,on the back of normalisation of inflation(staying at the upper end of the 2-4%target range)and a less hawkish Fed.So while the risks stemming from rising inflation and interest rates affecting customers servicing ability have reduced,we are still cautious on the sector.This is due to the imminent slowdown in economic growth(from 2018s 6.2%to c6.0%in 2019e,according to HSBCs economist),driven by weaker private investment and government spending,and a persisting tightness in liquidity(coming from a widening current account deficit).Phil CPI%(year-end,since Dec98)Phil Peso movement since Dec98 Source:Bangko Sentral ng Pilipinas(BSP)Source:Bloomberg Moderation in loan growth from 14%in 2018 to c12%in 2019e The Philippines has posted above 6%real GDP growth every year since 2011,making it one of the fastest growing economies in ASEAN.Economic growth slowed down in 2018 to 6.2%from 2017s 6.7%,dragged down by exports,and private and government spending.And HSBCs economist expects a further slowdown going into 2019(to c6.0%),as these drags are prolonged.The slowdown has had an impact on loan growth,which has declined from 16%in 2017 to 14%in 2018.12.44.96.74.40.02.04.06.08.010.012.014.0Dec-98Dec-00Dec-02Dec-04Dec-06Dec-08Dec-10Dec-12Dec-14Dec-16Dec-18Inflation Rate52.3335.0040.0045.0050.0055.0060.00Dec-98Dec-00Dec-02Dec-04Dec-06Dec-08Dec-10Dec-12Dec-14Dec-16Dec-18 3 Equities Commercial Banks 20 February 2019 We anticipate banks to be cautious,on the back of a moderation in economic growth,external global headwinds and upcoming mid-term elections slated to be in May 2019(see ASEAN election guide 2019 Outlook Part 2,dated 10 Jan 2019).As such,we anticipate loan growth to soften slightly to c12%.Loan growth in 2018 was pretty broad-based wholesale/retail(+15%YoY),real estate (+11%YoY)and financial intermediation(+30%YoY)were the biggest contributors.Across segments,business(which accounted for 83%of total loans as of 4Q18)loan growth has been extremely robust.For banks under our coverage,large corporates have grown 21%y-o-y in 2017 and 8%YTD in 3Q18,while middle market and small-and medium-sized enterprises(SMEs)have grown 15%y-o-y in 2017 and 4%YTD in 3Q18.Consumer loans have also done reasonably well,growing at 15%y-o-y in 2017 and 6%YTD in 3Q18.Phil banking system loan growth%YoY Source:BSP,HSBC estimates Phil banking system loan split%Phil coverage banks loan growth%YoY Source:BSP Source:Company data,HSBC estimates Note:The data labels are for 2019e Tightening liquidity to help NIM The current account deficit stood at 2.7%as of 9M18,largely due to significant imports for infrastructure growth.This has led to further tightening in liquidity in the system loan-to-deposit ratio(LDR)rose from c75%in Mar 2018 to almost 80%by the end of 2018,while excess liquidity parked at Bangko Sentral ng Pilipinas(BSP)is also at all-time lows.Our economist anticipates BSP to cut the reserve requirement rate(RRR)by 300bp to 15%by the end of this 12%9%4%14%12%16%19%12%17%16%14%12%14%0%5%10%15%20%25%200820092010201120122013201420152016201720182019e2020eConsumer17%Business83%12%12%12%14%9%5%10%15%20%25%30%BDOBPIMBTUBPSECB201620172018E2019E2020E Equities Commercial Banks 20 February 2019 4 year(estimated PHP300bn or c3%of total loans),in a bid to release some liquidity in the system,to stimulate growth.Nonetheless,we still expect pressure to remain,and the current account deficit to stand at c.1.8%by the end of 2019e.The positive impact for banks is on their margins,as banks are able to price loans higher,enjoying NIM expansion,but that also means that the demand for loans is likely to decline.As such,we think banks should be able to maintain their margins at least for 2019e(c3.4%).Phil banking system LDR%Phil coverage banks NIM%Source:BSP Source:Company data,HSBC estimates Note:The data labels are for 2019e Commercial banks term deposit facility 1M term deposit rate trend(%)Source:CEIC,BSP Source:Bloomberg,BSP Moderate non-interest income growth In 2018,system non-interest income grew a weak 4%(vs 2017s-10%),driven by lacklustre growth in trading gains and fees.Between 2010 and 2013,trading gains could account for as much as 50%of total non-interest income for the system,but this has gradually dwindled to about one-third.Going into 2019e,we continue to anticipate marginal trading gains effect,as interest rates are expected to be stable at 4.75%.Meanwhile,fees have seen a rising proportion,from 32%in 2013 to 54%at the end of 2018.We think that fee growth could see a slowdown on the back of moderating economic growth.For the banks under our coverage,we anticipate fees to grow at a moderate pace,from an aggregate growth of 0.8%in 2018e to 3.4%in 2019e.79.0%68.0%70.0%72.0%74.0%76.0%78.0%80.0%Mar-16Jun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-183.68%3.10%3.94%2.99%3.15%2.5%2.7%2.9%3.1%3.3%3.5%3.7%3.9%4.1%4.3%BDOBPIMBTUBPSECB201620172018E2019E2020E1150100200300400500600700Jun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18PHP bnCB:Deposits:Term depsot facility5.18 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19%5 Equities Commercial Banks 20 February 2019 Phil banking system non-interest income growth%YoY Phil banking system non-interest income split%Source:BSP Source:BSP Phil coverage banks non-interest income growth%YoY Phil coverage banks fee income growth%YoY Source:Company data,HSBC estimates Note:The data labels are for 2019e Source:Company data,HSBC estimates Note:The data labels are for 2019e Mild asset quality slippage System NPLs have been rather stable in 2018,standing at c1.8%,which is at a similar level versus a year ago,and are at all-time lows.We had initially expected that asset quality would see some slippage on the back of elevated inflation levels.Now that this risk is abating with Januarys headline inflation declining to 4.4%(slightly above BSPs target range of 2-4%)from the peak at 6.7%in September and October 2018,we see less potential for slippage on asset quality.We anticipate that the banks under our coverage should see their NPL ratios trend upwards slightly,from 1.6%in 2018e to 2.0%in 2019e.Similarly,credit costs are also expected to trend upwards slightly(but to a smaller extent),from 0.37%in 2018e to 0.41%in 2019e.Looking within consumer NPL ratios,the trends are in line with the overall headline NPL ratio trends.Mortgages,autos and credit cards NPL ratios have been stable since the end of 2017 until 2Q-3Q18(last available data).Only salary loans are still bucking the trend,seeing an increase since end 2016(at c3.0%)to c6.3%(as of 3Q18).-25%-20%-15%-10%-5%0%5%10%15%20%25%30%200720082009201020112012201320142015201620172018Total non-interest income0%10%20%30%40%50%60%70%80%90%100%200720082009201020112012201320142015201620172018Net feesTradingOthers8%3%6%10%-10%-30%-25%-20%-15%-10%-5%0%5%10%15%20%BDOBPIMBTSECBUBP20172018E2019E2020E2%4%5%2%12%-20%-15%-10%-5%0%5%10%15%20%25%30%35%BDOBPIMBTUBPSECB20172018E2019E2020E Equities Commercial Banks 20 February 2019 6 Phil banking system gross NPL ratio%Phil banking system consumer loans split NPL ratio%Source:BSP Source:BSP Ample capital The banking system is well capitalised by the end of 2018,capital adequacy ratio(CAR)was at 12.2%,above the universal and commercial banks minimum requirement of 10%.Starting this year,the banks will fully implement the additional D-SIB(Domestic Systematically Important Banks)capital requirement,where identified banks are required to have a higher loss absorbency(HLA).The HLA requirement of 1.5%to 2.5%will be on top of the conservation buffer of 2.5%and the minimum core equity tier 1(CET1)ratio of 6%,which translates to a minimum of 10%or 11%for the DSIBs.As of 3Q18,all the banks under our coverage have CET1 levels above the BSPs requirement,ranging from 12.5%to 16.3%,of which BDO has the lowest levels,while SECB has the highest currently.Just last year,BPI and MBT raised PHP50bn and PHP60bn,respectively,to top-up their regulatory capital buffers and for growth.Nonetheless,higher dividend pay-outs are unlikely,given the conservative nature of the Central Bank.As such,capital levels are expected to remain high,with limited scope for higher dividend pay-outs(c15-35%dividend pay-out ratio),which will impact ROEs.Phil banking system CAR%Phil coverage banks capital ratios(as of 3Q18)Source:BSP Source:Company data 1.77%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5%Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec-18Gross NPL ratio2.8%3.8%4.7%2%4%6%8%10%12%14%16%Mar-08Mar-09Mar-10Mar-11Mar-12Mar-13Mar-14Mar-15Mar-16Mar-17Mar-18Residential loansAuto loansCredit card receivables12.21011111212131314141515Dec-01Dec-03Dec-05Dec-07Dec-09Dec-11Dec-13Dec-15Dec-17Capital adequacy ratio(%)13.9%17.0%17.8%16.4%18.6%12.5%16.1%15.2%13.8%16.3%0%2%4%6%8%10%12%14%16%18%20%BDOBPIMBTUBPSECBTier 2Tier 1 7 Equities Commercial Banks 20 February 2019 Valuations and ratings Despite the relatively better share price performance this year compared to 2018(PFINCs YTD+0%vs 2018s-20%),driven by abating risks arising from rising inflation and interest rates,we believe that liquidity tightness remains a key area to watch out for.As such,we are selective in the stocks within the sector,because:We anticipate ROA to see some pressure(from 1.24%in 2017 to 1.06%by the end of 2020e),driven mostly by higher credit costs(mostly coming from credit cost normalisation),as revenue ROA remains fairly stable.Moreover,sector valuations are not particularly cheap.The sector is currently trading at 1.3x 2019e PB vs ROE of 9%(vs historical averages of 1.7x PB vs 13%ROE).On PE,the sector is currently trading at 16x 2019e,which is almost at+1SD above its 10-year historical mean of 14x.Within the sector,we prefer larger banks that are less susceptible to rising funding costs,have a strong balance sheet(in terms of low NPL ratios,higher reserve coverage and ample capital)and stronger EPS growth prospects on these parameters,MBT(rated Buy)is best positioned,in our view.Phil coverage banks core DuPont analysis 2010 2011 2012 2013