MTM relief cushions bank capital

From AB Capital's The Opening Bell: Three Moves

Event

The Bangko Sentral ng Pilipinas (BSP) allowed banks to waive mark-to-market (MTM) deductions on peso government securities (GS) from April to December (via BSP Memorandum No. 2026-027), provided affected fair value through other comprehensive income (FVOCI) holdings are transferred to held-to-collect/held-to-maturity (HTC/HTM). The relief follows a roughly 200bp jump in local yields since the Middle East crisis began.

View

In our view, this is positive for banks with large securities portfolios, especially MBT, SECB, and CBC. Similar regulatory flexibility was used during past stress periods, including COVID and the global financial crisis (GFC)-era accounting relief cycle, to prevent temporary market shocks from eroding reported capital.

Catalyst

Key sensitivities are take-up, actual unrealized loss size, and yield direction. If yields stay elevated, the relief protects Common Equity Tier 1 (CET1) and capital adequacy ratio (CAR) optics. However, it does not remove economic duration risk, and BSP restrictions on select liquidity facilities should temper moral hazard concerns.

Action

We think the relief supports near-term sentiment for banks with larger securities books, particularly MBT, SECB (both rated NEUTRAL), and CBC (rated OUTPERFORM). Investors should still differentiate between accounting relief and earnings quality, as credit costs, funding pressure, and securities reinvestment yields remain the bigger drivers.

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.