GTCAP’s used car warranty venture foretells vehicle foreclosure armageddon

GT Capital Holdings (GTCAP) is the publicly listed holding company of the Ty family. GTCAP controls Metrobank (MBT) and owns Toyota dealerships in the country. Being big in banking and auto distribution, GTCAP must have a front seat view on the performance of vehicle financing.

GTCAP’s new venture, Premium Warranty Services Philippines, will supply vehicle warranty for used cars in the country. This could mean that GTCAP having insights on this field is expecting a boom in used car sales. One of the biggest feeders of used car is foreclosure.

Banks are the biggest motor vehicle lender. And speaking of banks, Security Bank Corporation (SECB) just recently touched the oversold category when it traded at a low of 104.20.

It can be recalled that in 2016 The Bank of Tokyo-Mitsubishi UFJ infused a 36.9 Billion Pesos of fresh capital into SECB. With that fresh capital, SECB accelerated the growth of its retail banking business and provided better coverage to the SME sector. Motor vehicle lending falls into retail banking. Most of that fresh capital might have been allocated to retail lending then COVID came.

SECB’s stock price has been recently trending downward, has it reached bottom? There is no way to assess the performance of the loan portfolio of SECB from the outside. Clues can only be taken from outside signals. Institutional investors have recently sold SECB shares.

SECB’s price to book value of 0.6527 is still above its peers. Notably, the market is pricing PNB’s equity to just 0.209 to a Peso.

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