August 10, 2014

MBT nets P9.1b in 1H14

Metrobank (MBT, Buy) today disclosed that its net income for 1H14 reached P9.1b, down 50% YoY due to the absence of exceptional trading gains and substantial one-time gains from asset sales that were posted last year. Despite this, the bank continued to show healthy growth in its core businesses.

Net interest income was up 29% YoY, driven by a 19% loan growth (to P648b) and 23% deposit growth (to P1.1t). The commercial segment continued to drive loan growth, allowing MBT to maintain its net interest margin at 3.9% relatively the same as the 1Q14 level). Non-interest income came in at P13.6b, with contributions from fee income, trading gains and gains from asset sales.

Operating expenses grew 6% YoY to P19.8b, while provisions for losses declined 30% YoY to P1.9b. The lower provisioning is justified by the continued improvement in the bank’s asset quality metrics.

NPL ratio improved to 1.3% vs. 1.8% in the same period last year, while NPL cover increased to 160% vs. 125% last year. The bank also had healthy capitalization ratios, with its capital adequacy ratio (CAR) ending at 15.4% and common equity tier 1 (CET1) ratio at 12.1%.

Our take: Based on our quick calculations, MBT’s 2Q14 results came in at P3.4b. This represents a slight acceleration from its normalized 1Q14 earnings of P2.9b. The QoQ improvements may be attributed to lower operating expenses and provisioning.

Further, quarterly net interest income was relatively flat at ~P11.1b each in 1Q14 and 2Q14. Considering these, the bank is on-track to meet the 2014 consensus estimate of P17b especially if it can sustain its margins and healthy loan growth. – WealthSec