‘The powder is dry’: PNB ready to seize opportunities in tougher economy

Insider Spotlight

• PNB sees opportunity in a tougher economy, with its large capital buffer giving it room to keep lending even as higher rates pressure other banks.
• Business loans are the focus, accounting for 92 percent of PNB’s loan book and limiting its exposure to potentially riskier consumer debt.
• Investors are already warming to the story, with PNB shares up more than 40 percent since the start of the year.

Taipan Lucio Tan-backed Philippine National Bank (PNB) is ready to seize opportunities in a tougher economy, with the century-old lender armed with enough financial firepower to stay on the offensive.

President and CEO Edwin Bautista expects PNB to keep growing its business even as higher interest rates create a more difficult environment for business and consumers alike.

Some lenders are more vulnerable, particularly as higher rates push down bond values and eat into capital, but Bautista said PNB is less exposed thanks to its “fat” buffer that gives it room to keep growing.

“The powder is dry. We’re just waiting for the right opportunities,” Bautista said in an interview.

Investor are taking notice, with PNB emerging as the strongest-performing major bank stocks this year after its share price climbed more than 40 percent to P76.60.

Room for growth

Higher rates cut both ways for banks: they can lift what lenders charge on loans but also push down the value of bonds bought when rates were lower, which can impact the balance sheet. 

Like all banks, PNB facing this risk, but Bautista explained its capital adequacy ratio of nearly 20 percent is well above the BSP’s 10-percent minimum. 

This gives the bank considerable room to absorb the impact.

“We are all going to be exposed. The difference is our buffer is so fat that it will hardly matter,” Bautista said.

Focus on business loans 

PNB intends to put that firepower to work, with Bautista expecting loan growth from the first half to continue as the bank keeps lending to businesses.

“We continue to lend on the corporate side,” Bautista said, adding that PNB does not face the capital constraints that could force some competitors to slow down.

Companies and businesses account for most of PNB’s loan book, leaving only 8 percent exposed to consumers.

“We can take a little bit more risk because we have the capital to ride it out,” Bautista said.

Focus on business loans

PNB intends to put that firepower to work, with Bautista expecting loan growth from the first half to continue as the bank keeps lending to businesses.

Companies and businesses account for most of PNB’s loan book, leaving less than 10 percent exposed to consumer loans. 

That mix offers added protection as higher rates raise the risk of missed payments in the consumer segment. 

“We can take a little bit more risk because we have the capital to ride it out,” Bautista said.

—Edited by Miguel R. Camus