Stock in Focus: BDO Unibank, Inc. (BDO) – 11 Jan 2023 by RCBC Securities

Summary of Broker’s Recommendation

We have a Buy recommendation on BDO with a Target Price of Php 138.90/share.

Analysis and Opinion

BDO’s 9-month (9M) 2022 net income rose 23% to Php 32.4 billion, driven by a 12% growth in net interest income and a 20% spike in other income. Net interest margin widened to 4.28% from 4.07% in 9M 2021. Total loans grew 7.4%, while deposits rose 11% yoy at Php3.0 trillion.

BDO’s asset quality has shown signs of recovery since taking a hit at the height of the pandemic. Its 9M 2022 NPL ratio improved to 2.23x from the peak of 3.12x in 1H2021. With the economy further reopening this year, we expect BDO’s 2023/2024F net interest income to increase 19%/11% respectively on the back of NIM expansion and sustained loan and deposit growth.

We forecast its 2023 and 2024 net income to rise by 18% and 11%, respectively. BDO trades at a 2023 price-to-book ratio of 1.1x, lower than its three-year average PE (2017-2019) of 1.8x.

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