Marcos flags stagflation risk, moves into policy focus

From AB Capital's The Opening Bell: Three Moves

Event

SECB’s 1Q26 net income fell 4% YoY to P2.6 billion, behind expectations at 20% of 2026E. PPOP grew 24%, supported by higher NII and muted opex, but FX/trading losses plus elevated provisions weighed on earnings.

View

In our view, management’s internal reset is progressing, but earnings recovery remains constrained. Loan growth was only 5% YoY and declined 2% QoQ, with management guiding for zero to mid-single-digit growth as it prioritizes risk discipline over expansion.

Catalyst

Credit cost remains the key swing factor. We now assume 200bps given retail seasoning, selected wholesale migration, and buffer rebuilding needs. NPL ratio rose to 3.1%, while coverage stayed low at 81%, keeping asset quality in focus.

Action

We downgrade SECB to Neutral and cut our TP by 25%. While 0.3x P/B looks cheap, we think the discount is justified by 7% ROE, muted loan growth, elevated provisions, margin pressure, and earnings volatility.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.

From AB Capital's The Opening Bell: Three Moves

Event

FLI’s 1Q26 net income rose 3.5% YoY to P1.1 billion, with revenues up 4.5% to P6.31 billion. Real estate sales increased 6.1%, supported by faster collections, construction progress, and strong March reservations of P2.7 billion.

View

In our view, the results show steady execution in a selective property market. Resi demand appears supported by RFO inventory and regional exposure, while retail leasing continues to recover, with mall revenues up 17% and occupancy improving to 80%.

Catalyst

Key drivers include RFO sell-down, leasing occupancy, and funding costs. The P9 billion bond issuance supports liquidity and refinancing flexibility, but higher rates could weigh on margins. A 5-10pp improvement in mall occupancy would provide incremental recurring income support.

Action

We think FLI remains a stable but lower-beta property exposure. Favor its diversified platform and regional resi pipeline, though upside likely depends on stronger leasing recovery and sustained reservation sales.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.

From AB Capital's The Opening Bell: Three Moves

Event

President Marcos flagged stagflation risk as April inflation surged to 7.2% and 1Q GDP slowed to 2.8%. Government is accelerating public spending, enforcing a P50 rice cap, and shifting toward direct household support through subsidies and transport relief.

View

In our view, this confirms a difficult macro mix of weaker growth and persistent cost-push inflation. Allowing some nonessential food price increases may reduce supply strain, but it also risks reinforcing inflation expectations if households interpret policy as accommodation of higher prices.

Catalyst

Key sensitivities are oil prices, food supply, and fiscal execution. If public spending accelerates meaningfully in 2Q, growth could stabilize. However, if oil remains elevated and food inflation broadens, we think the BSP may face pressure to tighten despite weak demand.

Action

We think investors should keep a defensive bias. Favor staples and utilities with resilient earnings, while staying cautious on discretionary, rate-sensitive, and import-heavy names. Monitor inflation expectations and budget execution as the main swing factors for market sentiment.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.