INTERNATIONAL credit watcher Moody’s Investors Service said on Monday the plan by Metropolitan Bank and Trust Co. (Metrobank) to raise billions in fresh capital this year will bode well for the bank and is positive for the lenders credit rating.
Just last week, Metrobank announced it has already finalized the terms of its plan to raise P60 billion in fresh equity capital through rights offerings to support their future business growth.
“The planned rights issue is credit positive because it will boost Metrobank’s capital buffers well above Basel III capital rules, while supporting credit growth,” Moody’s Vice President and Senior Analyst for the Financial Institutions Group Simon Chen said.
Moody’s estimates that the rights issuance would add about 390 basis points to the banks Common Equity Tier 1 (CET1) ratio of 11.8 percent as of December 2017.
“The additional capital would bring the CET1 ratio well above its peer banks, as well as above the regulatory minimum of 10 percent after taking into account the buffer for domestic systematically important banks, which will be fully phased in by January 2019,” Chen said in his report on Tuesday.
The stronger capital buffer as brought about by this rights offer is seen to support Metrobank’s credit growth down the line.
Metrobank’s gross loan growth in 2017 was 19 percent, broadly in line with the systems loan growth during the same period. Credit growth in the Philippines remains strong at about 20 percent annually.
The bank’s P60-billion potential capital, Moody’s said, is expected to last them three fiscal years before the lender would need to raise fresh capital anew.
“We expect that the capital raise will be sufficient to support credit growth of about 20 percent over the next three fiscal years [which ends in 2020], after which, the bank’s CET1 ratio will decline to 12 percent to 13 percent, which may leave the bank in need of new capital because internal capital-generation capacity lags credit growth,” Chen said.
The bank intends to complete the rights offering by early-April, and its largest shareholder, GT Capital Holdings Inc., which owns 36 percent, has committed to subscribe to at least its full rights entitlement in the stock rights offer.
Moody’s quoted Metrobank, saying the new capital will be used to acquire the 40-percent equity stake in Metrobank Card Corp., thereby increasing its ownership stake in the company to 100 percent, as well as to support future loan growth.
Apart from Metrobank, Bank of the Philippine Islands and Rizal Commercial Banking Corp. also expressed plans to raise fresh capital to support their expansion this year.