(The following statement was released by the rating agency)
Fitch Ratings-Singapore-October 24:
Fitch Ratings has affirmed Metropolitan Bank Trust Company's (Metrobank)
Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BBB-'.
The Outlook is Stable.
Key Rating Drivers
VIABILILTY RATING AND IDRS
Metrobank's Viability Rating and IDRs reflect its satisfactory asset quality and
profitability, adequate loss buffers, and generally stable funding and liquidity
profile stemming from an established franchise as the second-largest Philippine
bank by assets. The ratings also take into consideration the bank's high loan
concentration and the risks associated with high loan growth, which are common
across many Philippine banks.
The Stable Outlook indicates that Fitch expects Metrobank's credit profile to
remain steady over the next one to two years.
Metrobank's non-performing loan ratio of 1.5% at end-June 2019 remained lower
than the industry average of around 2.2%, although both ratios have deteriorated
modestly amid higher interest rates since the start of 2018. Fitch believes that
Metrobank's loan quality from previous higher credit growth is largely untested
over an economic cycle, and its high single-borrower concentration makes the
bank susceptible to impairment shocks. Loans expanded at a CAGR of about 18%
over 2014-2017, slowing to 10% in 2018. However, the broadly supportive economic
environment and the bank's steady underwriting standards mitigate these risks.
The bank's return on assets improved to 1.2% in 1H19, helped by a better net
interest margin (NIM) and trading gains. Asset yields and NIM are likely to have
peaked in light of easing policy rates. Still, we expect operating profitability
to remain close to the 2015-2018 range of operating profit/risk-weighted assets
of 1.8%-2.3%.
Metrobank's Fitch Core Capital ratio of 15.9% at end-2018 formed a healthy
loss-absorption buffer against impairment shocks, and the common equity Tier 1
ratio of 15.7% at end-June 2019 remained comfortably above local regulatory
requirements. The capital ratios have tended to decline gradually as loan growth
has outpaced organic capital generation in prior years. We expect this trend to
resume in the medium term, although we expect the bank to maintain adequate
capital buffers over regulatory requirements - with the support of its major
conglomerate shareholder, GT Capital Holdings Inc., if needed.
Funding and liquidity is a rating strength for Metrobank. The bank is mainly
deposit-funded (86% of total funding), underpinned by its franchise and a branch
network among the broadest in the Philippines. Current and savings accounts were
around 61% of total deposits at end-June 2019, and the net loan/deposit ratio of
86% reflected sound balance-sheet liquidity despite having risen in the past few
years.
SUPPORT RATING AND SUPPORT RATING FLOOR
Metrobank's Support Rating and Support Rating Floor are derived from Fitch's
assessment of a high probability of state support for Metrobank. This is due to
the bank's strong systemic significance, with a market share of around 13% of
system assets, and the state's financial ability to provide support as reflected
in the sovereign Long-Term IDRs of 'BBB', on Stable Outlook.
RATING SENSITIVITIES
VIABILITY RATING AND IDRS
Aggressive growth or a disproportionate concentration in higher-risk segments,
without sufficient offsetting risk controls, would be negative for the Viability
Rating. This may occur as the bank expands outside metropolitan Manila and into
the younger consumer market, although Metrobank has broadly shown a prudent risk
appetite despite higher growth in recent years. A significant reduction in
secured loans would be another sign of a rising risk appetite, particularly
given Metrobank's typically middle-market commercial borrower profile. In this
regard, secured loans have remained roughly steady at around 40%-45% of gross
loans.
Significantly weakened capital buffers, perhaps due to sustained rapid growth,
would also place pressure on the Viability Rating - unless replenished in a
timely manner. However, we do not expect this to occur in the near term, in
light of Metrobank's healthy capital buffers at present.
Continued improvement in risk, governance and financial-market frameworks, and
an improved risk appetite could be positive for the ratings, assuming the bank's
financial metrics remain broadly intact. For example, enhanced risk standards
and controls, and a sustained moderation in credit growth to be more in line
with internal capital generation and nominal GDP growth may indicate
improvements in the bank's risk appetite.
Metrobank's 'BBB-' IDRs are also supported by its Support Rating Floor, and
would not be affected by a Viability Rating downgrade unless factors driving
state support for the bank also weaken.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating and Support Rating Floor are sensitive to the sovereign's
ability and propensity to support the bank. Changes may result from a change in
the sovereign rating, although further sovereign upgrades may not necessarily
lead to an upgrade of the Support Rating Floor.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit
relevance is a score of 3 - ESG issues are credit neutral or have only a minimal
credit impact on the entity, either due to their nature or the way in which they
are being managed by the entity.
For more information on our ESG Relevance Scores, visit www.fitchratings.com/esg
Metropolitan Bank Long Term Issuer Default Rating; Affirmed; BBB-; RO:Sta
; Short Term Issuer Default Rating; Affirmed; F3
; Local Currency Long Term Issuer Default Rating; Affirmed; BBB-; RO:Sta
; Viability Rating; Affirmed; bbb-
; Support Rating; Affirmed; 2
; Support Rating Floor; Affirmed; BBB-
Contacts:
Primary Rating Analyst
Elaine Koh,
Director
+65 6796 7239
Fitch Ratings Singapore Pte Ltd.
One Raffles Quay #22-11, South Tower
Singapore 048583
Secondary Rating Analyst
Tamma Mutthaqien,
Associate Director
+65 6796 7237
Committee Chairperson
Grace Wu,
Senior Director
+852 2263 9919
Media Relations: Leslie Tan, Singapore, Tel: +65 6796 7234, Email:
leslie.tan@thefitchgroup.com; Peter Hoflich, Singapore, Tel: +65 6796 7229,
Email: peter.hoflich@thefitchgroup.com.
Additional information is available on www.fitchratings.com
Applicable Criteria
Bank Rating Criteria (pub. 12 Oct 2018)
https://www.fitchratings.com/site/re/10044408
Short-Term Ratings Criteria (pub. 02 May 2019)
https://www.fitchratings.com/site/re/10073011
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/site/dodd-frank-disclosure/10091310
Solicitation Status
https://www.fitchratings.com/site/pr/10091310#solicitation
Endorsement Policy
https://www.fitchratings.com/regulatory
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