Metrobank sets aside P23 billion for bad loan provisions

MANILA, Philippines — Metropolitan Bank & Trust Co. (Metrobank) alloted a P22.8 billion war chest as of end-June in anticipation of higher loan defaults due to the fallout from the pandemic.

Metrobank president Fabian Dee said the latest figure was more than five times the P4.6 billion allocated as of end-June last year.

“Consistent with our conservative business strategy, we are very mindful of future risks that will likely impact the entire banking industry, so we are doing an early buildup of larger provisions to ensure our readiness. We are taking all the necessary steps as we continue to focus on supporting our clients and the recovery of the overall economy,” Dee said.

As a result, the bank’s net income fell by 30 percent to P9.1 billion from January to June compared to P13 billion in the same period last year.

“Our core business remains strong. Pre-provision operating profit grew by 61 percent and the balance sheet is solid, with good deposit levels. We have faced crisis events in the past, and while the current pandemic is unprecedented, our substantial capital position combined with prudent strategic actions will enable us to weather forthcoming challenges,” Dee said.

As a result, Metrobank’s non-performing loan (NPL) cover rose to 188 percent, underscoring the strategy of beefing up reserves early in anticipation of future risks, while NPL ratio was steady at 1.56 percent.

With the slowdown across industries as economic activity came to grinding halt during the enhanced community quarantine in the middle of March, the bank said net loans and receivables declined by five percent to P1.3 trillion from P1.4 trillion.

Lending for the commercial segment was tempered as expansion plans were put on hold due to the uncertain business climate. Consumer loans were little changed as steady mortgage and increased credit card receivables offset the six percent decline in auto loans.

The bank said its deposit base inched up by five percent to P1.7 trillion from P1.6 trillion on the back of the 20 percent rise in low-cost deposits, improving the current account and savings account ratio to 69 percent from 61 percent last year.

Metrobank’s net interest margin improved by 41 basis points to 4.24 percent due to lower overall funding cost after the Bangko Sentral ng Pilipinas (BSP) slashed interest rates by 175 basis points to an all-time low of 2.25 percent.

On the other hand, non-interest income jumped by 55 percent as the hefty P13.1 billion trading and foreign exchange gains mitigated the 16 percent drop in service fees and commissions amid lower transaction volumes and waiver of fees.

Operating expense increased by seven percent to P29.6 billion from P27.8 billion, further improving the cost-to-income ratio to 45 percent from 56 percent as the bank continues to enhance productivity and efficiency.

The bank’s asset base was steady at P2.3 trillion, while total equity went up  by 8.9 percent to P323 billion from P296.5 billion, sustaining a capital adequacy ratio of 19.98 percent and common equity tier 1 ratio of 18.66 percent, both well-above the regulatory requirements.

Philippine banks continued to build up their loan loss provisions in anticipation of higher losses due to the COVID-19 pandemic.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the NPL ratio of Philippine banks rose for the fifth straight month to hit a five-year high of 2.43 percent in May from 2.31 percent in April.