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PHL banking sector to be erratic in first six months–BPI official

THINNING trading gains, as well as anticipated mergers and acquisitions, are expected to make this year a challenging one for the Philippine banking sector, according to a Bank of the Philippine Islands (BPI) official.

Speaking on the sidelines of the BPI Trade Feng Shui Market Forecast 2014 on Tuesday, BPI Trade Chief Executive Officer Mike Oyson said the banking sector will be erratic for the next six months.

“The banking sector has seen their good years. Their earnings were supported by huge trading gains over the last years,” Oyson said. “It will be a challenge for them to replicate or to substitute those trading gains with net interest income.”

BPI Trade, the stock-brokerage arm of the Ayala-led lender, predicts that banks will seek mergers and acquisitions in the next 12 to 18 months.

“The markets are opening, the foreign banks are huge and Philippine banks would need the size to be able to compete,” Oyson said.

He explained that universal banks need to expand, saying that expansions now are both organic and inorganic.

“Aside from pricing, what the smaller banks would like to have is a partner in business down the road. They want [to join] forces with existing banks with strong track records and strong branch equity,” the BPI Trade chief said.

Oyson also said the global market will see synchronized global growth for the first time in many years. He added that, for this year, one should be looking for companies that can surprise the market in terms of earning per share growth.

“So you have to decide which conglomerate you have to invest in. There are conglomerates that are consumer-related. There are conglomerates that are power-related and have little exposure to banks,” he said.

First Metro Investment Corp. (FMIC), the investment-banking arm of the Metrobank Group, said yields will still be subjected to external yield movements, mainly by the United States.

“Supply-and-demand dynamics will be dictated by foreign flows rather than local liquidity,” FMIC President Roberto Juanchito Dispo said.

FMIC said the equities market is seen to perform at the 6,300 to 6,500 level and price earnings ratio at 17 to 18x in the first half of the year.

Key growth industry drivers are power and utilities, properties, consumers, infrastructure and manufacturing.

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