Banking, consumer sectors seen leading Q4 earnings

BANKS and retailers are seen to have outperformed other listed companies in the fourth quarter of 2022 as the economic reopening provided a needed boost to loan demand and consumer spending.

“Philippine lenders are expected to have improved profitability due to the further reopening of the economy, which led to greater loan demand, higher revenues and better asset quality,” Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message.

“Banks may also benefit from higher interest rate income as interest rates were raised to counter elevated inflation,” he added.

The Bangko Sentral ng Pilipinas (BSP) raised the benchmark interest rate by 350 basis points (bps) to a 14-year high of 5.5% in 2022. The central bank will have its first policy meeting for the year on Thursday.

“Banks could outperform so long as non-performing loans remain low, as their margin may increase in a high interest period,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Mr. Arce and Mr. Limlingan also noted that during the last quarter of 2022, consumers recorded robust spending despite the high inflation.

“For the fourth quarter, consumer companies could still have surprises given that the last quarterly gross domestic product (GDP) report indicated household spending was robust despite inflationary pressures,” said Mr. Limlingan.

Meanwhile, Mr. Arce said the retail sector is also expected to have recorded better fourth-quarter earnings “as consumer traffic has bounced back to pre-pandemic levels.”

“Holiday-induced spending also likely propped up the sector and supported a slight rise in rental income through end-2022,” he said

“The easing of pandemic-related travel restrictions has also allowed a gradual reopening of domestic and international tourism,” he added.

According to Mr. Arce, the inflationary pressures from October to December last year were also offset by consumers’ revenge spending and remittances.

“Despite the rising inflation trend during the October to December stretch, revenge spending provided an additional boost to many sectors and industries,” Mr. Arce said.

“Overseas worker remittances, which remained resilient, were also an important factor in supporting domestic consumer spending,” he added.

Both analysts said that companies that posted their fourth-quarter results last week met their expectations.

Mr. Limlingan said “they have been coming within or above expectations,” although it is still too early to tell with only a handful of companies reporting so far.

“Fourth-quarter corporate earnings are, by far, in line with expectations as Filipino consumers’ propensity to shop and visit brick-and-mortar establishments started to rebound ahead of the Christmas holidays,” Mr. Arce said. — Justine Irish D. Tabile