Bank consolidation in the Philippines seen to intensify next year

Despite lower earnings trend.

According to Maybank Kim Eng, plays on consolidation likely will continue up to next year, supporting share prices even if earnings are projected to trend lower due to the absence of huge trading income. We expect our banking universe to post 6% decline in net income. We remain buyers of BDO, EW, MBT, PNB, and RCB.

Here's more:

Index outperformance on anticipated consolidation. The Philippine financial index has surged 5% since 18 September, outperforming all other sectors, and the benchmark index by 3pps.

We believe the performance was due not only to the delay in tapering of the US Federal Reserve but also influenced by the well-anticipated industry consolidation, with the latest being the purchase by China Banking Corp (CHIB) of more than 67% of the largest stand-alone thrift Planters Development Bank (PDB).