Growth drivers of BPI in 2022

January 30, 2022 Ignacio "Toting" Bunye 218 views

Ignacio BunyeBank of the Philippine Islands (BPI) continues to get excellent reviews from financial analysts.

This was reported by Ma. Theresa Marcial, BPI Chief Financial and Sustainability Officer to the BPI board recently.

CLSA, UBS, Bank of America and First Metro recently upgraded their outlook on the Ayala-led bank . The lone downgrade came from JP Morgan.

CLSA praised BPI for reinventing itself, capitalizing on digital opportunities. CLSA sees BPI as regaining market leadership in deposits, and views the bank as positioned for a multi-decade growth story. CLSA upgraded BPI to 125 (Buy).

UBS views BPI as an under-appreciated digital leader. It forecasts that BPI will outperform peers in a post Covid environment. UBS upgraded BPI from 100 to 135 (Buy).

Bank of America thinks that digital driver will sustain earnings momentum. Lower provisions, recovering loan growth and increasing fee income will also improve earnings outlook. However, frontloading of IT expense will offset earnings. BofA upgraded BPI to 110 (Buy).

First Metro upgraded BPI to 111 (Buy).

Other industry observers noted BPI’s Price to Book ratio above peers, its remarkable digitalization journey and its lower than industry NPL ratio.

JP Morgan downgraded BPI because of projected cost increase. Nonetheless, JP Morgan noted BPI as being one of the first to adopt open banking. Fees are showing improvement and signs of monetization.

Ms. Marcial forecasts the key growth drivers of BPI in 2022 as follows:

1. Expected acceleration in economic growth to 7.6 percent.
2. Lending rates will go up on the back of a possible 75 bps increase in policy rates.
3. Loans will grow faster this year than last year, 8 to 10 percent with acceleration in growth in personal loans and credit cards (up 28 percent), microfinance (up 15 percent).
4. Corporate expected to pick up from last year’s 4-5 percent to 6-8 percent this year, basically signaling a pickup in loan growth momentum.
5. Projected higher interest rates signal higher NIMs and increased NII.
6. Digitalization initiatives will increase fee income by 20 percent in 2022.

Ms. Javier reports that the bank has sufficient buffer for any modest NPL formation and because BPI has already aggressively provisioned in the last two years, the bank is significantly reducing credit cost this year.

“With lower provisions, higher fee income, higher margins, we expect earnings growth in the mid-teens. And this is despite frontloading of opex,” Ms. Javier added.

“We see 2022 as an investment year where we expect over 20 percent increase in expenses as we accelerate the execution of initiatives, particularly as we enhance existing platforms and develop and launch new platforms.”

The bank is implementing a “branch transformation plan involving the reduction of branch footprint, rationalizing and modernizing existing branches, retooling and re-scaling employees to become sales and financial advisers.”

“We expect transaction volumes, and transaction related expenses to increase. This involves ramping up on marketing, promotions, sales and customer delight program, change in customer relationship management system.”

Having recently failed in its bid to acquire the P55 billion retail business of Citibank, “BPI is now
aggressively positioning to organically grow its credit cards and wealth management business for 2022.”

BPI President Jose Teodoro “TG” Limcaoco, meanwhile, briefed the BPI board on the launch of new products using GCash . BPI put two mutual funds under the GInvest platform on Dec 6. One is a dollar fund run by Black Rock where an investor can invest in pesos. The other fund tracks the Philippine Stock Exchange index. Without any marketing, BPI is getting 3,000 new customers every day without fail. Five weeks after launch, BPI was able to double its customer count base at BIMI (the mutual fund company of BPI) to 110,000 new customers which is the same number of customers they acquired in the last 20 years.

A week later, BPI launched a new product with GCash where car registrants with LTO can actually buy Third Party Liability coverage on GCash and get a certificate which is immediately linked directly to the LTO database. So for those who personally register their vehicles, they can skip one step and not have to go to the shack on the side of an LTO office to buy TPL.

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