Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

Bank of the Philippine Islands / Equity Bottom-Up

*Credit Leverage On Its Way: Bank of the Philippine Islands (BPI.PM) [BPI] reported 3Q21 results of PHP 5.7 bn, declining PHP 1.1 bn (16.6%) linked quarter. While results were down linked quarter, what impressed us most was how well controlled credit metrics appear to be; and*Significant Credit Improvement: Our net new NPL figure of PHP 152 mn or 1.5% annualized (65.4% at 4Q20) intimate that management may actually be on to something. Given where BPI and the Philippines are with credit, it would not surprise us in the least if BPI reverses loss reserves.

*Credit Leverage On Its Way: Bank of the Philippine Islands (BPI.PM) [BPI] reported 3Q21 results of PHP 5.7 bn, declining PHP 1.1 bn (16.6%) linked quarter. While results were down linked quarter, what impressed us most was how well controlled credit metrics appear to be; and*Significant Credit Improvement: Our net new NPL figure of PHP 152 mn or 1.5% annualized (65.4% at 4Q20) intimate that management may actually be on to something. Given where BPI and the Philippines are with credit, it would not surprise us in the least if BPI reverses loss reserves.

Bank Of Philippine Islands – Asia’s Top Performer

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Philippine Stock Exchange / Equity Bottom-Up

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The <a href="https://www.smartkarma.com/entities/philippine-stock-exchange-inc" target="_blank" data-smartkarma-citation="entities:23182:1" rel="noopener">Philippine Stock Exchange (PSE PM)</a> reported a strong set of 1H2021 numbers with net income up by +63.1% YoY on the back of a +30.9% increase in operating revenues.
The bottom-line performance was driven by the increase in operating revenues together with positive investment income. 
The company saw particularly strong growth in listing fees due to a number of large size IPOs, whilst transaction fees and SCCP clearing fees increased due to higher market volumes, driven by particularly strong retail activity.
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The real growth driver for revenues and profits in 1H2021 came from a significant increase in capital raisings.
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Even after the flush of offerings in 1H2021, the listing pipeline is robust for 2H2021 and going into 2022, with a number of already approved issues plus upcoming planned listings as well as a number of planned REITs in the pipeline, which have already been featured in the news.
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The <a href="https://www.smartkarma.com/entities/philippine-stock-exchange-inc" target="_blank" data-smartkarma-citation="entities:23182:1" rel="noopener">Philippine Stock Exchange (PSE PM)</a> has also laid out a number of key initiatives set to launch this year which will provide a potential boost to activity on the exchange including new rules on short selling.
<a href="https://www.smartkarma.com/entities/philippine-stock-exchange-inc" target="_blank" data-smartkarma-citation="entities:23182:1" rel="noopener">Philippine Stock Exchange (PSE PM)</a> will launch a new marketing campaign to encourage more companies to list and especially SMEs. 
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This latest set of results underline the positive story with <a href="https://www.smartkarma.com/entities/philippine-stock-exchange-inc" target="_blank" data-smartkarma-citation="entities:23182:1" rel="noopener">Philippine Stock Exchange (PSE PM)</a> which continues to look promising with a strong IPO and placement pipeline for 2H2021 and going into 2022. 
If we factor in the company's cash per share into the <a href="https://www.smartkarma.com/entities/philippine-stock-exchange-inc" target="_blank" data-smartkarma-citation="entities:23182:1" rel="noopener">Philippine Stock Exchange (PSE PM)</a> valuation then the company is trading on an ex-cash FY21E PER of 16.0x and FY22E PER of 14.5x making it look significantly more attractive versus its peers together with stronger growth prospects. 
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The Philippine Stock Exchange (PSE PM) reported a strong set of 1H2021 numbers with net income up by +63.1% YoY on the back of a +30.9% increase in operating revenues.
The bottom-line performance was driven by the increase in operating revenues together with positive investment income. 
The company saw particularly strong growth in listing fees due to a number of large size IPOs, whilst transaction fees and SCCP clearing fees increased due to higher market volumes, driven by particularly strong retail activity.





The real growth driver for revenues and profits in 1H2021 came from a significant increase in capital raisings.

Even after the flush of offerings in 1H2021, the listing pipeline is robust for 2H2021 and going into 2022, with a number of already approved issues plus upcoming planned listings as well as a number of planned REITs in the pipeline, which have already been featured in the news.



The Philippine Stock Exchange (PSE PM) has also laid out a number of key initiatives set to launch this year which will provide a potential boost to activity on the exchange including new rules on short selling.
Philippine Stock Exchange (PSE PM) will launch a new marketing campaign to encourage more companies to list and especially SMEs. 





This latest set of results underline the positive story with Philippine Stock Exchange (PSE PM) which continues to look promising with a strong IPO and placement pipeline for 2H2021 and going into 2022. 
If we factor in the company's cash per share into the Philippine Stock Exchange (PSE PM) valuation then the company is trading on an ex-cash FY21E PER of 16.0x and FY22E PER of 14.5x making it look significantly more attractive versus its peers together with stronger growth prospects. 


Philippine Stock Exchange (PSE PM) - Thriving on Retailers and IPOs

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Executive Summary: Momentum behind the recent Treasury market rally may be starting to slow. Greater conviction is likely to build over the weeks which follow as economic data is published, rather than result from this week’s FOMC meeting.It is unlikely that the Fed will signal that it is ready to start tapering its asset purchase program this week. We are yet to see the whites of wage-growth eyes. Meanwhile, Canada became the first major economy to signal an exit from asset purchases. Canada’s central bank also indicated that a rate rise is now expected in the second half of 2022. Global interest rates did not react.  However, we may be tricked into seeing things which not there as upcoming wage data may point to rapidly falling wages.As such, the narrative remains left to be taken in the fixed income markets.  We may have reached a peak in short positioning unwinding and the re-entry of Japanese investors in the market is also taken as a given. Unexpectedly good economic data over the next few weeks could be bad for Treasury yields.  This could re-ignite the reflation and carry-trade rallies.While Treasuries continue to tread water, spreads on US CCC rated notes continued to trade at levels not seen since prior to the Global Financial Crisis in 2007. Investors are becoming concerned that the stretch for yield may be overdone. Excess US spread compression could benefit Asia HY as investors move offshore to grab better yields and excess spreads.In the bank credit markets, Asia-headquartered institution performed across the credit continuum while European bank bond remained stuck with carry-trade unwind performance. The combination of spread tightening and Treasury bond curve flattening generated positive total returns amongst Asia banks.We will hit the peak in bank earnings reports in the upcoming week. US banks set a high bar for performance by generating stellar investment banking and progressively improving core banking results over the last two weeks. They then signaled that they anticipate significantly higher interest rates later this year by raising record breaking amounts in the debt capital markets. Other banks may follow with material debt issuance over the next few weeks after reporting earnings this week.  We explore these market themes within.Market Outlook: Already looking past upcoming spikes in inflation and job creation, the Treasury market is repricing for lower growth and lower rates over a longer time-period. This should be risk asset supportive as the US dollar finally weakens. The risk is that of impotent monetary policy and a constrained fiscal response in a shorter than expected business cycle.

Executive Summary: Momentum behind the recent Treasury market rally may be starting to slow. Greater conviction is likely to build over the weeks which follow as economic data is published, rather than result from this week’s FOMC meeting.It is unlikely that the Fed will signal that it is ready to start tapering its asset purchase program this week. We are yet to see the whites of wage-growth eyes. Meanwhile, Canada became the first major economy to signal an exit from asset purchases. Canada’s central bank also indicated that a rate rise is now expected in the second half of 2022. Global interest rates did not react.  However, we may be tricked into seeing things which not there as upcoming wage data may point to rapidly falling wages.As such, the narrative remains left to be taken in the fixed income markets.  We may have reached a peak in short positioning unwinding and the re-entry of Japanese investors in the market is also taken as a given. Unexpectedly good economic data over the next few weeks could be bad for Treasury yields.  This could re-ignite the reflation and carry-trade rallies.While Treasuries continue to tread water, spreads on US CCC rated notes continued to trade at levels not seen since prior to the Global Financial Crisis in 2007. Investors are becoming concerned that the stretch for yield may be overdone. Excess US spread compression could benefit Asia HY as investors move offshore to grab better yields and excess spreads.In the bank credit markets, Asia-headquartered institution performed across the credit continuum while European bank bond remained stuck with carry-trade unwind performance. The combination of spread tightening and Treasury bond curve flattening generated positive total returns amongst Asia banks.We will hit the peak in bank earnings reports in the upcoming week. US banks set a high bar for performance by generating stellar investment banking and progressively improving core banking results over the last two weeks. They then signaled that they anticipate significantly higher interest rates later this year by raising record breaking amounts in the debt capital markets. Other banks may follow with material debt issuance over the next few weeks after reporting earnings this week.  We explore these market themes within.Market Outlook: Already looking past upcoming spikes in inflation and job creation, the Treasury market is repricing for lower growth and lower rates over a longer time-period. This should be risk asset supportive as the US dollar finally weakens. The risk is that of impotent monetary policy and a constrained fiscal response in a shorter than expected business cycle.  

Bank Credit Weekly: Momentum Slows as Conviction Is Lacking

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Debt Capital Markets

iShares MSCI EM ESG Optimized / Debt Capital Markets

We initiate our coverage of Asian social bonds with a thematic report on (1) the current stage in the Asian capital markets, (2) social bond compliance regime, and (3) recent issuance in Asia. In subsequent months, we aim to launch a request for comment for our framework we will use to analyze social bond compliance with the Social Bond Principles (SBP).
This report also includes the United Nations’ Sustainable Development Goals (SDG) and how SDG is linked to ESG (Environment, Social Development, and Governance) investments. SDG is not simply Environment, Social Development, and Governance but also Productivity which results in employment, economic growth, innovation, better infrastructure, and stronger industry.
Among ESG, Governance is what we have already accounted for when analyzing credit investments. That said, the key is how we can now design investments to improve environment (i.e. green bonds), social development (i.e. social bonds), and/or both green and social bonds (i.e. sustainability bonds). 
Green bonds were the first among fixed income instruments to take off. In a time of COVID-19, the most precarious elements of the planet is human life and, in our judgment, social development can take precedence over environment, productivity, and governance although all the four elements should be considered together. The emergence of COVID-19 has led to a drastic rise in social bond issuance and we expect this realization of a lack of social development to increase demand and supply of social bonds in the near term.

We initiate our coverage of Asian social bonds with a thematic report on (1) the current stage in the Asian capital markets, (2) social bond compliance regime, and (3) recent issuance in Asia. In subsequent months, we aim to launch a request for comment for our framework we will use to analyze social bond compliance with the Social Bond Principles (SBP).
This report also includes the United Nations’ Sustainable Development Goals (SDG) and how SDG is linked to ESG (Environment, Social Development, and Governance) investments. SDG is not simply Environment, Social Development, and Governance but also Productivity which results in employment, economic growth, innovation, better infrastructure, and stronger industry.
Among ESG, Governance is what we have already accounted for when analyzing credit investments. That said, the key is how we can now design investments to improve environment (i.e. green bonds), social development (i.e. social bonds), and/or both green and social bonds (i.e. sustainability bonds). 
Green bonds were the first among fixed income instruments to take off. In a time of COVID-19, the most precarious elements of the planet is human life and, in our judgment, social development can take precedence over environment, productivity, and governance although all the four elements should be considered together. The emergence of COVID-19 has led to a drastic rise in social bond issuance and we expect this realization of a lack of social development to increase demand and supply of social bonds in the near term.

Social Bonds: Here Come the Next Green Bonds

*Poor Results: BDO Unibank (BDO.PM)[BDO] reported 4Q20 net income of PHP 11.3bn, a PHP 1.0 bn (8.5%) decline linked quarter. Highlighting the linked quarter result we note that loss provisions increased PHP 5.0 bn (360.8%) reflecting the continued breakdown in credit quality;  Credit Risk Rising: Not including the doubling of restructured loans, the level of net new NPLs increased PHP 17.8 bn or 115.8% on an annualized basis which is alarming considering the 67.9% annualized increase at 2Q20.  By our calculation, BDO’s reserves  - at a minimum  - are light in the neighborhood of PHP 66 bn or six quarters of bottom-line results.   This is particularly disturbing as BDO is amongst the most trusted banks in the Philippines and ASEAN, and this certainly calls into question what competitor loan and securities portfolios look like; and *Capital Raise Potential: Assuming that our provision analytics are correct, we find that BDO’s CET1 ratio would decline 13.2% to under 11.0% - raising concerns of a capital raise given BDO’s unrealized losses at hefty restructured loans, BDO Life, decelerating loan growth, narrowing margins, and trading volatility.

*Poor Results: BDO Unibank (BDO.PM)[BDO] reported 4Q20 net income of PHP 11.3bn, a PHP 1.0 bn (8.5%) decline linked quarter. Highlighting the linked quarter result we note that loss provisions increased PHP 5.0 bn (360.8%) reflecting the continued breakdown in credit quality;  Credit Risk Rising: Not including the doubling of restructured loans, the level of net new NPLs increased PHP 17.8 bn or 115.8% on an annualized basis which is alarming considering the 67.9% annualized increase at 2Q20.  By our calculation, BDO’s reserves  - at a minimum  - are light in the neighborhood of PHP 66 bn or six quarters of bottom-line results.   This is particularly disturbing as BDO is amongst the most trusted banks in the Philippines and ASEAN, and this certainly calls into question what competitor loan and securities portfolios look like; and *Capital Raise Potential: Assuming that our provision analytics are correct, we find that BDO’s CET1 ratio would decline 13.2% to under 11.0% - raising concerns of a capital raise given BDO’s unrealized losses at hefty restructured loans, BDO Life, decelerating loan growth, narrowing margins, and trading volatility.

BDO Unibank – With This Level Of Risk, A Capital Raise Can’t Be Too Far Behind

Philippines

Bank of the Philippine Islands (BPI) is a universal bank offering a wide range of financial products and solutions to retail and corporate clients. Its services include consumer banking and lending, asset management, insurance, securities brokerage, foreign exchange, leasing, and corporate and investment banking. BPI is headquartered in Makati City, Philippines, and was founded on August 1, 1851.

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Bank of the Philippine Islands (BPI PM)

Bank Of Philippine Islands – Asia’s Top Performer

BANK OF PHILIPPINE ISLANDS: BPI reported QOQ 3Q21 results declined 16.6%. What impressed us most was how well controlled credit metrics are. It...

Thomas J. Monaco

Philippine Stock Exchange (PSE PM) - Thriving on Retailers and IPOs

The Philippine Stock Exchange (PSE PM) continues to look undervalued relative to other listed regional exchanges with a strong IPO and placement...

Angus Mackintosh

Bank Credit Weekly: Momentum Slows as Conviction Is Lacking

Momentum behind the Treasury market started to slow. Greater conviction is likely to build over the weeks which follow as economic data is...

Hank Calenti, CFA

BDO Unibank – With This Level Of Risk, A Capital Raise Can’t Be Too Far Behind

BDO UNIBANK: BDO reported a 4Q20 net income decline of 8.5% linked quarter. The level of net new NPLs increased 116% with reserves light by PHP 66...

Thomas J. Monaco

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Market Cap (USDm)

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Bank Of Philippine Islands – Asia’s Top Performer

BANK OF PHILIPPINE ISLANDS: BPI reported QOQ 3Q21 results declined 16.6%. What impressed us most was how well controlled credit metrics are. It...

Thomas J. Monaco

Philippine Stock Exchange (PSE PM) - Thriving on Retailers and IPOs

The Philippine Stock Exchange (PSE PM) continues to look undervalued relative to other listed regional exchanges with a strong IPO and placement...

Angus Mackintosh

Bank Credit Weekly: Momentum Slows as Conviction Is Lacking

Momentum behind the Treasury market started to slow. Greater conviction is likely to build over the weeks which follow as economic data is...

Hank Calenti, CFA

Social Bonds: Here Come the Next Green Bonds

Social bonds are the new green bonds as COVID-19 has made investors realize social development is as important as environment. Here is our...

Bondcritic

BDO Unibank – With This Level Of Risk, A Capital Raise Can’t Be Too Far Behind

BDO UNIBANK: BDO reported a 4Q20 net income decline of 8.5% linked quarter. The level of net new NPLs increased 116% with reserves light by PHP 66...

Thomas J. Monaco