Metrobank hikes provisions for bad loans as profit grows

MANILA, Philippines — Metropolitan Bank & Trust Co. (Metrobank) hiked its provisions for bad loans nearly five-fold in the first nine months as gross income grew by 41 percent to P52.4 billion, the Ty-led bank said in a statement.

As a result, Metrobank said its nine-month net income reached P11 billion.

“Our results are relatively strong across the board. Total revenues grew 20 percent to P96.3 billion, income before provisions increased by 41 percent to P52.4 billion, and net interest margin improved further to 4.1 percent, while deposits and capital levels remain very healthy. Amidst the effects of the pandemic looming over the economy, the bank’s overall performance is better than expected,” said Metrobank president Fabian Dee.

“Even though non-performing assets are currently within manageable levels, our strategy is to be conservative by building reserves in case the crisis drags on,” he said.

While non-performing loans (NPL) have been relatively manageable so far, the bank has set aside P35.4 billion in provisions for bad loans, almost five times more than the P7.8 billion booked in the same period last year.

As a result, the NPL cover went up to 174 percent from 96 percent previously, supportive of the bank’s conservative provisioning strategy.

As of end-September, its NPL ratio rose to 2.25 percent from 1.52 percent in the same period last year, but Dee said the increase in NPLs remains within expectations amidst a slowdown in the economy.

Meanwhile, deposits held up relatively well, increasing by 10 percent to P1.7 trillion, propelled by the 22 percent growth in low-cost deposits. Healthy deposit growth accompanied by the 175-basis point reduction in policy rates helped ease funding cost in the first nine months of the year, driving net interest margin improvement by 20 basis points to 4.1 percent.

As the global health crisis continues to constrain economic activities, net loans and receivables contracted by 13 percent year-on-year to P1.2 trillion. Commercial lending sustained a slowdown as clients deferred expansion plans and used excess liquidity to pay down debt obligations. Consumer loans similarly declined amid economic uncertainty, which limited consumption to essential goods and deterred big-ticket spending.

Non-interest income rose by 28 percent, lifted by robust trading and forex gains of P17.8 billion. Meanwhile service fees and commissions remained weak, declining by 10 percent primarily due to lower transaction volumes and waiver of some fees.

Despite the challenging environment, the bank’s cost-to-income ratio improved to 46 percent from 54 percent previously. This was achieved as operating expenses growth slowed down to two percent year-on-year to P43.9 billion, underscored by continued efforts to enhance productivity and efficiency, and cost management of items deemed non-essential under the present business conditions.