The banks of 2011

Philippine banks without exception have been performing better than expected for the past couple of years. MBT, PNB, UBP, just to name a few have outperformed the PSEi last year and are expected to do so again this year, with so many of them with still below sectoral average numbers. Another reason I seem to like banking stocks are for their consistent dividend yields (many, not all). There are two banks I'm holding on to for a bit UBP and MBT, and here are my reasons.


UBP, as mentioned before, is one of my portfolio's core stocks. Its dividend policy has been consistently 30 percent of net income of the previous year, which puts this year's to a minimum of at least 3 pesos, in comparison to last years. On top of that, the bank is aiming for a better 2011 compared to an already amazing 2010. Amazing, because it has outperformed a lot of analyst's estimates. ATR Kim Eng expected UBP to post a decrease in income, instead its 9mo performance has already outpaced its full year 2009 by around 30 percent. Other fundamental numbers such as a PE of 8-9ish, P/BV of 1.1x, a decent ROE, all of these below the financial sector's average. And since its an aboitiz company, I do hope that AP, AEV, etc's earnings trickles down to UBP. The only downside UBP seem to have is that its lightly traded for a banking stock, its off the radar of a lot of traders and big time institutional buyers.

MBT seems to be swinging up and down quite a bit lately. Maybe its the recent stock rights offering (SRO) or maybe its the general sideways direction of the market. Unusual, for one of the Philippine's leading banks. It reached a 52 week high of 80+ and dropped to as low as 62 after the SRO, it climbed all the way up to 75 a week or two ago and as i type this entry down its currently at 67-68. I purchased a few shares a month ago at an average of 64 and sold at 73 and 75. I am more than willing to enter MBT again after it breached the 70 pesos level and I'm willing to purchase more once it touches 65. My confidence in MBT is with its story, a leading bank with strong growth potential; very few of those in the Philippines or the world. Its fundamental numbers are actually decent as well; a consistent dividend policy and solid EPS growth. A number of analysts have estimated MBT to be worth at least 80 pesos.

The market seems to be trending downwards after a good week, I guess taking some profits from my positions last week is paying off. I've never been comfortable with such astronomic increases by individual securities or the index in general. I learned my lesson the hard way in 2007-8. Last year's 3rd quarter rally was incredible and it gave a lot of traders very little room to breathe and assess what was actually going on. I guess in the long run, this will serve as a very good lesson for people who have entered the market just recently. I'm still pretty bullish about 2011, but then again its always better to know when to strengthen your positions or go light on them.

A few stocks that I've been observing for quite some time: AP, AT, DMC, EDC, ICT, MBT, MPI, SCC, SMDC, UBP, URC, VLL! Happy reading guys!