Banco de Oro: Finding Ways to Deliver Growth

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2017 marked as its record level of profitability

Banco de Oro, known as BDO, has fallen 14.5% so far this year. At 140/share, the largest bank in the Philippines by assets trades at 2.1x its book value (vs. 3x industry figure).

In 2017, BDO claimed an all-time high profits in its recent press release having had a seven percent rise from its prior year.

BDO also stood at a better financial footing as of year-end. The financial firm had a Tier 1 Common Equity ratio of 12.9% in 2017 compared to 10.7% in 2016.

Gross non-performing loan ratio, another bank/financial metric, (the lower the better) was at 1.2% compared to 1.3% a year prior.

Meanwhile, provisions grew unattractively by 1.7x to 6.5 billion.

A more critical metric—net interest margin (the higher the better)—was at 3.4% in 2017 compared to 3.1% in 2016.

BDO’s exact book value for 2017 is not available in any of the company filings yet, but it had 294.7 billion as of September 2017—a 27% increase from September 2016.

From 2014 to 2016, BDO provided a sliver of its cash to its shareholders. About 20.6 billion in dividends with a bountiful 417 billion in cash.

COL Financial, a reputable brokerage firm in the country, had a hold recommendation with a fair value of 137/share (vs. 140 at the time of writing.

Although COL said that it does not found BDO to be attractive at these price levels, personal estimates indicated that BDO is undervalued at an intrinsic value per share figure of 160/share.

Disclosure: No shares in BDO.

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