BDO Unibank, Inc. inched down last week after the United States’ credit rating downgrade affected the local market, eclipsing the bank’s strong financial results.
A total of 13.13 million BDO shares worth P1.90 billion were traded from July 28 to Aug. 4, data from the Philippine Stock Exchange (PSE) showed.
The Sy-led bank’s share price finished at P141 apiece, 4.1% lower than its July 28 close of P147 each.
Year to date, the stock’s price rose by 33.4%.
“While BDO’s strong results could have led to some positive reactive moves, we think that much of the price action this week was driven by external factors,” Rastine Mackie D. Mercado, research director at China Bank Securities Corp., said in an e-mail.
These external factors, he said, include the broad market risk-off sell-off last week following Fitch’s downgrade of the US credit rating.
“We also think that some investors treated BDO’s earnings release as a ‘sell-on-news’ opportunity to take some profit,” Mr. Mercado added.
Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financial, Inc., said investors focused on the Fitch move despite the bank’s “impressive” financial results.
“The downgrade has negative implications for the US and consequently the global economy which is why investors opted to exit the market last week,” he said in a Viber message.
BDO reported last week that its consolidated net income soared by 52.6% year on year to P18.72 billion in the second quarter.
Its attributable net income, likewise, grew by 53.2% to P18.70 billion from the P12.21 billion booked in the same period last year.
This brought the attributable net profit in the first semester of the year to 47%, higher than the P23.94 billion posted in the January to June period in 2022.
Meanwhile, debt watcher Fitch downgraded the US government’s top credit rating, Reuters reported, a move that garnered an angry response from the White House and surprised investors, coming despite the resolution of the debt ceiling crisis two months ago.
Fitch lowered the US to AA+ from AAA, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills, Reuters said.
The downgrade made Fitch the second major rating agency after Standard & Poor’s strip the country of its triple-A rating.
For Mr. Tantiangco, the bank’s lending operations will remain healthy and be sustained in the second half of the year.
“BDO’s full-year net income attributable could rise by 30.4% year on year while for the [third quarter], bottom line could increase by 22.5% year on year,” he said.
He added that from a historical standpoint, BDO is at bargain levels, which should make it compelling for investors.
For BDO, investors are expected to monitor the country’s bank lending data.
“If the growth continues in our bank lending, then this could spur positive sentiment for our banks in the market,” Mr. Tantiangco said.
For Mr. Mercado, prospects of continued top-line growth remain given the outlook of sustained loan growth, Net interest margin strength and fee income expansion can convince investors to consider BDO.
“While current valuations could lead to continuing near-term profit taking, we think that BDO could still have some room to eventually run higher.”
He also added that the Sy-led bank has built a strong NPL (nonperforming loan) coverage to guard against potential adverse impacts to asset quality in case macro risks materialize.
He pegged BDO’s support and resistance at P141.80 and P150, respectively.
Mr. Tantiangco, on the other hand, placed support at the P140.00-P142.00 range and resistance at P150. — Abigail Marie P. Yraola