November 11, 2014

MBT nets P13.1b for 9M14

In a disclosure to the Exchange, Metrobank (MBT, Buy) said that its 9M14 net income reached P13.1b, 37% lower YoY. The decline was mainly due to the absence of extraordinary trading gains and one-time gains from asset disposals. 9M14 net interest income grew 23% YoY to P34b, driven by 21% loan growth (to P697b), 23% deposit growth (to P1.1t) and relatively stable net interest margin of 3.8%.

The bank also reported non-interest income of P19.0b, consisting of P6.6b in service charges and commissions, P1.5b from trading and forex gains and miscellaneous income of P10.9b. The latter already includes proceeds from property divestments and sale of non-core assets which were done to shore up the bank’s Basel 3 capital ratios. Operating expense growth was at a 7% to P29.7b, while provisions for losses were lower 17% YoY to P3.3b.

The bank’s asset quality metrics continued to improve, with NPL ratio going down to 1.1% vs. 1.4% in the same period last year, and NPL cover increasing to 169% vs. 140% in the same period last year. The bank’s Capital Adequacy Ratio (CAR) came in at 16.2% and Common Equity Tier 1 (CET1) Ratio at 12.1%, both well-above regulatory requirements.

Our take: MBT’s 9M14 earnings are tracking ahead of consensus 2014 estimate of P15.9b, accounting for 82% of consensus forecast. The bank’s results reflect the expansion of its core businesses and stabilizing margins. Note that growth in net interest income (23%) was slightly better than loan growth (21%), implying that margin compression has already ended. We expect net interest income and margins to improve going forward as 70% of MBT’s loans are have short-term repricing terms. We also note of the bank’s manageable opex growth and the decline in the bank’s provisions despite improving asset quality. – WealthSec