Bank merger, strong Q3 results propel stocks to new 9-year high

Share prices rose to a fresh nine-year high yesterday, buoyed by robust third quarter corporate results and news of a major merger in the banking sector, dealers said.

They said stocks climbed, led by Equitable PCI Bank and Banco de Oro after they announced their merger to form the nation’s second-largest lender by assets.

Other issues rose after the government said inflation was at its slowest pace in more than two years and as the yield of the Benchmark Treasury bill that banks use to price loans fell to a six-month low.

"Rates will continue on a downtrend," said Gilbert Lopez, an analyst at Macquarie Securities Ltd. "The best way to play the drop in rates is through the property sector."

The Philippine Stock Exchange Index gained 28.85 points, or one percent, to 2,792.74 at the close of trading yesterday. The benchmark, which climbed for 11 straight days before Monday’s 0.1 percent decline, closed yesterday at its highest since July 1, 1997.

Philippine Long Distance Telephone Co. climbed to a record after the company said it posted its biggest ever quarterly profit. Globe Telecom Inc. climbed to 13-year high after saying third-quarter profit grew by more than half from a year earlier.

Equitable PCI, the nation’s fourth-largest lender by assets, added P7, or 9.7 percent, to P79.50, its highest since Aug. 24. Banco de Oro, the country’s fifth-largest bank, added P1, or 2.3 percent, to P45.50, a record close.

Banco de Oro said that it will exchange 1.8 of its shares for every share of Equitable PCI, paving the way for the combination of the two banks. Both banks also reported better-than-expected profit in the third quarter. "Although there may be one-off expenses in writing down goodwill and rationalizing the headcount through 2007, minimal overlap is seen in branches and customers," said Jojo Gonzales, head of research at Philippine Equity Partners. "We maintain our buy rating and target of P55 a share for Banco de Oro."

SM Investments Corp., which owns both Banco de Oro and Equitable PCI, added P2.5, or 0.8 percent, to P287.50, a record close.

The government said inflation slowed for the seventh month in October at 5.4 percent, the lowest since June 2004, on higher food production, a stronger peso and lower fuel costs. Lower inflation gave the central bank room last week to effectively cut borrowing rates by staggering the rates it pays lenders.

Separately, the yield of the 91-day Treasury bill fell to 4.837 percent in a government auction Monday. It is the second time that the yield fell, supporting the outlook of lower costs of mortgages and higher home sales.

Filinvest Land, the nation’s largest builder of affordable homes, added two centavos, or 1.2 percent, to P1.64, its first gain in six sessions. Ayala Corp., owner of the nation’s largest property builder, rose P5, or one percent, to P495. – AFP