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Best offense is good defense: Metrobank poised to lead lending rebound with industry-best Tier 1 capital, NPL cover

Bilyonaryo Arthur Ty’s conservative strategy is expected to pay dividends with Metrobank expected to take the lead among local banks in the expected resurgence of lending in 2021.

Morgan Stanley Asia said Metrobank “has the highest capital ratios among the big three banks which gives it room to absorb potential credit quality deterioration.”

Morgan Stanley said that having an industry-best Tier 1 capital, which which measures a bank’s financial health based on its core capital relative to its risk-weighted assets, would give Metrobank the edge among its peers especially in the face of an economic contraction; intense pressure on revenue and credit quality; and limited margins from the central bank’s low policy rates.

Aside from a strong capital base, Metrobank is armored with the sector’s biggest cover against bad loans.

As of September 2020, Metrobank’s non-performing loan (NPL) cover is pegged at 174 percent with BDO at 138 percent and Bank of the Philippine Islands’ 101 percent).

This is the reason why Morgan Stanley is bullish on Metrobank.

“Following its underperformance against other Philippine banks since 2019, Metrobank is trading close to our bear case, we see any downside risks to the share price as limited,” said the Hong Kong-based firm in a recent research report.

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