Metrobank to issue $500M in debt notes compliant with Basel 3

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MANILA, Philippines — Local banking giant Metropolitan Bank and Trust Co. plans to issue as much as $500 million worth of debt notes qualifying as tier 2 or supplementary capital under the Basel 3 framework.

The offering of Basel 3-compliant tier 2 notes will be made in one or more tranches “as part of the bank’s regulatory capital compliance” in accordance with the Basel 3 framework.

Universal and commercial banks are required by the Bangko Sentral ng Pilipinas to adopt by Jan. 1, 2014 the capital adequacy standards under Basel 3, which introduces a complex package of reforms designed to improve the ability of banks to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.

Basel 3-compliant tier 2 notes must have a provision for the instrument to either be written off or converted to common equity upon occurrence of certain trigger events.

Metrobank earlier obtained approval from stockholders to amend the bank’s bylaws to pave the way for the capital build-up to P100 billion (in par value) from P50 billion. The increase in Metrobank’s capital was proposed to be implemented through the issuance of a mix of common and prepared shares.  Under the framework endorsed by the board, 1.5 billion common shares will be issued with a par value of P20 per share while one billion in preferred shares will be issued with the same par value of P20 per share.

In line with this capital hike, the bank’s board approved the declaration of a 30 percent stock dividend amounting to P12.67 billion.  This is equivalent to 633.42 million shares to be taken out of the bank’s paid-in surplus, representing the minimum 25 percent subscribed and paid-up capital for the doubling of the authorized capital stock  to P100 billion.

At of end-2012, Metrobank had a total equity of P120 billion and total capital adequacy of P16.3 percent with core or tier 1 capital at 13.7 percent.

The proposed increase in authorized capital stock gives Metrobank flexibility to issue Basel 3-compliant tier-2 notes in the future.

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