BDO, Metrobank to Gain From Philippine Rate Cut, CLSA's Dy Says

By Ian C. Sayson

Dec. 19 (Bloomberg) -- Banco de Oro Unibank Inc. and Metropolitan Bank & Trust Co., the two biggest Philippine lenders by assets, may gain the most after the nation's first interest rate cut in almost 11 months, CLSA Ltd. said.

Shares of Banco de Oro or BDO Bank, the biggest, may rise 17 percent to 27.75 pesos in 12 months, while Metrobank, as the No. 2 lender is called, may gain 29 percent to 30 pesos, said AlfredDy, head of Philippine research at CLSA.

The two banks may boost lending and market share after Bangko Sentral cut overnight rates by 50 basis points to 5.5 percent yesterday as the economy slows from a global slump. The cut follows reductions in other countries, including the U.S. where the Federal Reserve lowered its main interest rate to as low as zero for the first time on Dec. 16.

``Among banks, we prefer BDO and Metrobank because these are quite oversold and trading at significant discounts to book values,'' Dy, ranked No. 1 Philippine analyst this year by AsiaMoney, said in an interview today. The rate cut will help banks `` soften the blow of a global economic slump,'' he added.

BDO is trading at a 91 percent of its book value while Metrobank is 25 percent lower, according to Bloomberg data. The average for the 15 Philippine commercials banks is 1.3 times, and Bank of the Philippine Islands or BPI, the nation's biggest by market value, trades at twice its book value.

Shares of BPI may rise 15 percent to 45 pesos in a year, according to Dy, trailing the possible returns of both Metrobank and BDO Bank.

The interest rate cut should bring down borrowing costs and help prevent the credit market from tightening, Central bank Deputy Governor Diwa Guinigundo said yesterday. Slowing inflation allowed the bank to make a ``preemptive move'' to help the local economy amidst slowing global growth, he said.

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net.