Stockbroker SB Equities Inc. said Philippine Stock Exchange (PSE) index companies posted a cumulative profit of P39.06 billion in the first half, down 56.4 percent from previous year.
PSEi-linked conglomerates posted a combined P35.3 billion profit, down 74.8 percent from the prior year. All listed conglomerates posted a combined P47.53 billion profit for the period, down 68.9 percent.
“The pandemic’s impact was wide-sweeping—hitting the financial performance of key subsidiaries in property, consumer retail, banking, and industrials. The biggest losers include Ayala Corp. —whose net income declined P30 billion or 79 percent to P7.9 billion due to weakness in real estate and industrials—as well as San Miguel Corp. which reversed to a net loss of P7.6 billion due to a steep net loss of Petron Corp. as well as sharp volume declines in alcoholic beverages amid liquor bans during ECQ (enhanced community quarantine),” the stockbroker said.
SB Equities said as result, PSEi conglomerates shifted to business continuity and liquidity, which led to noticeable deferment of capital expenditures across their respective portfolios.
“Major subsidiaries of listed conglomerates appear to remain self-sufficient for now as the pandemic has not yet resulted in any material liquidity issues which would require any capital calls from their parent firms. Subsidiaries are still able to tap capital markets and have more bank credit lines for financing,” it said.
Financial stocks posted a combined profit P41.07 billion, down 35.1 percent, with PSEi firms’ profit down 40.7 percent to P30.76 billion.
SB Equities said financial firms “conducted preemptive provisioning for potential spike in credit losses due to non-performing loans (NPL), induced by the adverse economic conditions during the community quarantine period.”
BDO Unibank Inc. was the largest drag, with first half net income plunging 79 percent to P4.3 billion as management decided to do practically all of the planned P22.4 billion in loan loss provisions for 2020 in the first half of the year.
It said banks reported stronger net interest income despite loan growth slowdown as lower cost of funding of banks translated into better net-interest margins (NIM).
“Our outlook is for NIMs to taper off going forward as the impact of the 175 bps (basis point) policy rate cuts on loan yields since the start of the year may have a lag,” it said.
SB Equites said banks’ asset quality has been “largely benign over the past decade, but adverse conditions during the ECQ/GCQ could induce higher NPL.”
SB Equities said NPL ratios are still far from levels during previous crises where they peaked at 18.7 percent but have deteriorated to 2014 levels and resulted in elevated credit costs.
“Given loan moratoriums under the Bayanihan Act, we expect more pandemic-related NPLs to show up on banks’ books by end-3Q20. Further, loan loss reserves seem too low to absorb much more NPLs. (The) Bangko Sentral ng Pilipinas’ stress tests indicate that the system can withstand NPL ratio of even up to 5 percent,” it said.
SB Equities said telcos posted a 1.6 percent profit decline at P23.19 billion with Globe Telecom Inc., and PLDT Inc. displaying a divergence in results in the second quarter.
“Earnings of both companies were heavily driven by data, comprising 75 percent and 71 percent of total service revenues, respectively, SB Equities said.
Property companies posted a 41.4 percent decline in profit at a combined P35.71 billion, with PSEi-linked stocks posting a 48.6 percent drop at a P24.04 billion combined profit.
Electricity-related stocks posted a cumulative profit of P14.44 billion, down 33.8 percent form last year, with PSEi-linked stocks posting a cumulative profit of P10.24 billion, down 38.6 percent.
SB Equities said that overall, the near-term outlook for the sector remains weak given the depressed spot prices and low sales volume, which are still below pre-COVID levels.
Consumer and retail stocks posted a combined 75.8 percent drop in profit at P6.47 billion, with PSEi-linked stocks down 87.5 percent at P1.93 billion.
Consumer staples manufacturers, Universal Robina Corp. and Century Pacific Food Inc., “had a good second quarter as the need for staples, better brand awareness, improved supply chain capabilities, and shelf visibility pulled up their sales across different categories.”
San Miguel Food and Beverage Inc. took a hit on the beer business induced by the liquor ban.
Restaurant operators took a huge hit with limited operating capacity and several closures during the quarantine period.
This led same store sales growth to plunge by double-digits, slightly cushioned by the delivery businesses. Both Jollibee Foods Corp. and Shakey’s Pizza Asia Ventures Inc. put out a budget for restructuring program, as they cut down on non- operating stores and closed down facilities.
Puregold Price Club Inc. and Robinsons Retail Holdings Inc. sustained their momentum in the supermarket segment.