Metrobank 3rd quarter profit plunges by 78%

Ty family-led Metropolitan Bank and Trust Co. saw in the third quarter the steepest decline in net profit so far this year as it beefed up provisions for loan losses that might arise from business disruptions caused by the COVID-19 pandemic.

Metrobank’s attributable net profit declined by 77.56 percent year-on-year to P1.92 billion, the lowest quarterly earnings seen by the bank since the third quarter of 2013. This brought its nine-month net profit to P11 billion, down by 48.79 percent year-on-year, based on its regulatory filing.

The bank had posted P6.1 billion in net profit in the first quarter and P3 billion in the second quarter of this year.

This was as Metrobank booked P35.36 billion in loan provisioning expense in the first nine months, of which P12.58 billion was set aside in the third quarter. The January to September loan loss buffer was nearly five times more than the level last year.

The latest provisioning means that for every peso of loans that turned sour, the bank has set aside P1.74 in loan loss cover, much higher than the 96 centavos set aside for every peso of bad loans a year ago. This was seen in line with a conservative provisioning strategy.

“Our [January to September] results are relatively strong across the board. Total revenue 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. Amid the effects of the pandemic looming over the economy, the bank’s overall performance is better than expected,” Metrobank president Fabian Dee said.

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

As of end-September, Metrobank’s bad loans rose to 2.25 percent as a ratio of total loans from 1.52 percent in the same period last year. This was within expectations amid a slowdown in the economy. Banking regulators are bracing for an increase in banks’ bad loans to as much as 4.5 percent of total loans by the end of this year.

Metrobank’s net interest income went up by 17 percent year-on-year to P65.86 billion in the first nine months, and by 8.4 percent year-on-year to P21.37 billion in the third quarter.

The increase in net interest income was mostly attributed to the increase in net interest margins, while its loan book contracted by 13 percent year-on-year to P1.2 trillion. Commercial lending continued to slow down as clients deferred expansion plans and used excess liquidity to pay down debt obligations. Consumer loans similarly declined as households limited consumption to essential goods and deterred big-ticket spending during this pandemic.

Nine-month noninterest income rose by 28 percent, lifted by robust trading and foreign exchange gains of P17.8 billion, bulk of which was generated in the first semester.

Meanwhile, service fees and commissions remained weak, declining by 10 percent year-on-year, primarily due to lower transaction volumes and waiver of some fees.

On the funding side, deposits increased by 10 percent to P1.7 trillion in the nine-month period, propelled by the 22-percent growth in low-cost deposits, which now constituted 71 percent of total deposits from 64 percent a year ago.

The 175-basis point reduction in the Bangko Sentral ng Pilipinas’ policy rates helped ease funding cost in the first nine months, driving net interest margin improvement by 20 basis points to 4.1 percent.