Analysis

First Quarter 2021 (1Q21) Net Income Down 22% to P5.0 Billion

BPI posted a net income of P5.0 Billion in 1Q21, down 22% year-on-year (YoY), as higher fees and commissions could not offset NII weakness and the one-time tax adjustment brought by CREATE Law. Excluding the P1.9 Billion impact due to lower corporate income tax, net income would have been 8% higher YoY. Loan loss provisioning gradually tapered off to P3.6 Billion due to further reduction in expected credit losses (ECL). Moreover, BPI’s NPL ratio of 2.76% was significantly lower than U/KBs’ average of 3.56% as of end-February.

First Quarter 2021 (1Q21) Showed Stability in Fee-Based Income. 

Fees and commissions’ contribution to total revenues grew by 23% in 1Q 2021, supported by the recovery in transactions, along with normalized trading gains. On the other hand, the 6% drop in NII was attributed to lower loan balances – as large corporates scaled back their capex and working capital requirements – which eventually resulted to 31-bp NIM contraction.

Recommendation

Maintain Buy rating on Target Price of P106.20. We raise our Target Price by 14% to P106.20 after taking into account the recovery of broader economy. Peak NPL scenario is likely to occur towards second half of 2021 (2H21), with NPL ratio ranging between 4-6%.

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