Metrobank earnings plunge as loan-loss reserves jump

Ty family-led Metropolitan Bank & Trust Co. posted a steep drop in its second quarter profit after raising provisions for bad loans to P22.8 billion.

In a statement issued yesterday, Metrobank said net income fell 52.08% to P3.01 billion due to proactive measures taken to protect itself further from the economic onslaught brought about by the COVID-19 outbreak.

In the six-months ending June, profit tumbled 29.9% to P9.13 billion while interest income was flat at P58.19 billion.

Metrobank president Fabian S. Dee, however, said the bank’s core business remains strong.

“Pre-provision operating profit grew 61% 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,” said Dee.

“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 build-up 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,” he added.

Even as non-performing loans ratio was steady at 1.56%, Metrobank took the conservative route by ramping up provisions over five times the P4.6 billion reported in the first half last year.

As a result, the NPL cover soared to 188%, which underscores the strategy of beefing up reserves early in anticipation of future risks.

With the slowdown across industries as activities ground to a halt during the strict lockdown in the second quarter, Metrobank’s net loans and receivables decreased 5% to P1.3 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 6% contraction in auto loans

Deposit base rose 5% to P1.7 trillion, largely driven by the 20% increment in low-cost deposits, improving the CASA ratio to 69% from 61% last year.This, together with the 175-basis-point drop in policy rates, led to the marked reduction in the bank’s overall funding cost thus resulting in net interest margin improving by 41 basis points to 4.24%.

Meanwhile, non-interest income grew 55% largely due to the hefty P13.1 billion trading and forex gains.This mitigated the weakness in service fees and commissions, which declined 16%, a result of lower transaction volumes and waiver of some fees.

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