January 22, 2015

MBT to raise up to P32b via stock rights offer

In a disclosure to the Exchange, Metrobank (MBT, Buy) today said it is planning to undertake a stock rights offer (SRO) that will raise common equity tier 1 (CET1) of up to P32b. The timing of the transaction is subject to receipt of regulatory approvals, as well as market conditions.

The fresh capital is expected to enable the bank to support its loan growth and its expansion into specific segments, such as the middle market and consumer segments. The capital from the SRO will also help the bank comply with stricter regulatory capital requirements moving forward, including potential capital charges pertaining to the Domestic Systemically Important Banks (DSIBs) and the Real Estate Stress Tests (REST).

Our take: MBT’s share price over the past few months underperformed due to concerns about capital adequacy and the possibility of a share issuance. We thus expect the bank’s recent announcement to address these concerns, as the bank has chosen to raise capital via SRO, which is more participative than a private placement.

We have always maintained that the capital-raising activity is intended to support the bank’s growth objectives and is not a result of any deterioration in asset quality or operations. Given this, we believe that the SRO will be positive for the bank, as it would allow MBT to continue growing while taking advantage of the country’s sustained economic growth. – WealthSec