In anticipation of the pandemic's impact, Metrobank doubled its loan loss provisions to P5 billion during the first three months of the year

As it posts P6.1B income in Q1, Metrobank braces for pandemic's impact by boosting reserves

Ian Nicolas Cigaral (Philstar.com) - April 30, 2020 - 7:42pm

MANILA, Philippines — Earnings of Metropolitan Bank & Trust Co. (Metrobank) hit P6.1 billion in the first quarter, with the lender joining other local banks in setting aside more provisions to counter potential loan defaults from borrowers hammered by the coronavirus disease-2019 (COVID-19) outbreak.

In a disclosure to the local bourse on Thursday, Fabian Dee, company president, warned that the “current conditions point to an expected slowdown in the business environment and challenges ahead.”

In anticipation of the pandemic's impact, Metrobank doubled its loan loss provisions to P5 billion during the first three months of the year—a precautionary move meant to shield its balance sheet from a likely increase in unpaid loans. Last year, only P2.4 billion was segregated to cover for loan losses.

Metrobank's decision followed a week of earnings reporting. Local lenders such as Ayala-led Bank of the Philippine Islands and Security Bank Corp. also announced boosting buffer funds to cover for non-performing loans defined as unsettled credit 30 days past due. 

“Mindful of the potential impact of this pandemic, we decided to take the prudent approach of increasing provisions to cover anticipated risks,” Dee said.

Metrobank's move to increasing defenses comes amid a healthy balance sheet. In the first three months, only 1.4% of the lender's loan portfolio were considered soured loans, all while resources to cover potential losses stood at 114% of the amount of these credits.

"Our underlying business is strong. We started the year with healthy growth in loans, deposits and other revenue streams," Dee added.

Breaking down its first-quarter financial performance, Metrobank said its core business grew 13% annually as of March, fueled by 6% uptick in loans. The listed lender also expanded its deposits 8% on-year, while non-interest income reached P6.2 billion.

On the flip side, the bank's operating cost jumped 8% year-on-year to P14.5 billion.

“We have weathered periods of crisis in the past and we are confident that we are well prepared, as the bank has one of the strongest capital positions in the industry,” Dee said.

With Luzon in lockdown until May 15, Metrobank, the country's second largest lender in asset terms last year, said 60% of its branches remain open nationwide to service clients with a skeletal workforce. 

Apart from the closure of some branches, lenders have been forced to extend due dates on loans after Luzon was placed under enhanced community quarantine that started last March 17. The grace period of 30 days is applicable for credit extended nationwide.

“We will continue to adjust our processes to ensure the sustained delivery of meaningful banking services; and implement the necessary measures to keep both our customers and our people safe,” Dee said.

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