July 23, 2014

Metrobank to issue second series of Basel 3 Tier 2 Notes

Metrobank (MBT, Buy) disclosed to the Exchange that it has started offering another series of Basel 3 compliant Tier 2 Notes. These will be MBT’s second issuance this year after the P16b Tier 2 note offering in March. MBT has secured BSP approval to issue up to $500m of Tier 2 notes in either USD and/or its PHP equivalent. The series 2 of notes will have a tenor of 11 years and coupon of 5.25%. Moreover, as a Basel 3 compliant instrument, the notes will have a loss-absorption feature.

Our take: Since MBT previously got BSP approval to issue up to $500m in Basel 3 compliant notes, we surmise that the bank will issue about P4b to P5b in this round of offering. Aside from maximizing the amount under the BSP approval, we believe that the bank intends to complete its capital requirements while interest rates are still low. Moreover, the series 2 of Tier 2 notes will further boost MBT’s Capital Adequacy Ratio, which stood at 16.0% as of 1Q14.– WealthSec