Quadruple dividends: Metrobank stronger with early, aggressive provisioning – Fabian Dee

Metrobank reported a 26 percent increase in its net income of P61.8 billion before provisions.

Metrobank reported a 26 percent increase in its net income of P61.8 billion before provisions.

In line with its strategy to build up reserves, Metrobank said it booked P40.8 billion in provisions which resulted in full year 2020 net income of P13.8 billion.

Its substantial capital prompted the Board of Directors to declare a special cash dividend of P3 per share on top of the regular dividend of P1 per share.

“Our strategy of early and aggressive provisioning in 2020 has made Metrobank stronger and well-prepared to weather future risks. Despite the events of 2020, our core business remains solid and we remain ready to be a key partner in economic recovery. Our high capital buffer has given us the opportunity to distribute more dividends this year. We will continue monitoring economic conditions and considering strategies that will maintain a balance between strong capital and optimal returns,” said Metrobank President Fabian S. Dee.

The Bank’s capital ratios are still among the highest in the industry. Based on the December 2020 balance sheet, Metrobank’s capital adequacy ratio (CAR) is estimated to move from 20.2 percent to 19.1 percent and Common Equity Tier 1 (CET1) ratio from 19.3 percent to 18.2 percent after dividends. Both measures are still substantially higher than the 11 percent minimum regulatory threshold for CET1 and 10 percent for CAR.

Non-performing loans have been manageable, with an NPL ratio of 2.41 percent from 1.30 percent in 2019. Nonetheless, the Bank has set aside P40.8 billion in provisions for bad loans, four times more than the P10.1 billion provisions booked in 2019. As a result, NPL cover went up to 163 percent from 103 percent in 2019 strengthening the bank’s capacity to withstand more bad loans.

The growth in operating income was supported by strong revenues and improving operating efficiency. The 22 percent increase in low cost current and savings accounts (CASA) to P1.3 trillion, propelled total deposits to reach P1.8 trillion in 2020 which reflected the Bank’s solid deposit franchise.

CASA ratio improved to 73 percent from 63 percent a year ago. Healthy CASA deposit generation helped ease the overall funding cost in 2020 and supported net interest margins, which improved by 14 basis points to 3.98 percent. As a result, net interest income rose 11.8 percent from the previous year.

This was achieved amid a 13 percent contraction in gross loans to P1.3 trillion as the economic impact of the pandemic affected business and consumer confidence. Commercial clients trimmed working capital loans and deferred expansion plans while consumer customers limited spending to essential goods and deferred big ticket purchases.

Non-interest income expanded by 20 percent, lifted by trading and FX gains of P19.2 billion as the Bank optimized its investment portfolio under a record-low interest rate environment.

Growth in operating expenses was kept at 4 percent to P60.1 billion, underscored by continued efforts to enhance productivity and operational efficiency. Cost-to-income ratio improved to 50% from 55 percent previously.

Metrobank ended 2020 as the country’s second largest bank with consolidated assets of P2.5 trillion.

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