We derive our ACB target price of D31,500 from a Gordon Growth Model (GGM)-based method as we believe this should represent the intrinsic value of the company and the potential net profit that it could generate from its net assets.


In our GGM, we assume a 20.3% long-term ROE, 6.0% long-term growth and a 16.0% cost of equity, leading to 2025E PBV of 1.4x, which is 0.5 SD above its 10-year average. We think ACB could trade higher than its mean as we expect it to deliver attractive long-term net profit growth. Together with the accumulation of capital, this should make the bank stronger, in our view. 

Downside risks that could impede the stock from reaching our target price include: 1) lower economic growth than expected, leading to slower loan growth and higher NPLs than we forecast; 2) tighter competition in retail lending; and 3) reduced liquidity in the banking system intensifying competition for deposits.