The Ty-controlled Metropolitan Bank and Trust Co. (Metrobank) is looking at a manageable non-performing loan (NPL) ratio of three percent by end-2020 from 2.25 percent in end-September.
Metrobank senior vice president Jette Gamboa said the bank’s NPL ratio is within the industry’s outlook of a three to four percent NPL ratio for 2020 while most banks also expect bad loans’ ratio to increase to five to six percent in 2021.
The estimated NPL ratio is similar with the Bangko Sentral ng Pilipinas’ prediction of a 4.6 percent ratio by end-2020 since borrowers’ capacity to pay was disrupted by the public health crisis. Industry NPL ratio remains at 2.8 percent as of end-August while NPL coverage ratio stood at 107.4 percent.
Gamboa said the bank, which has the highest loan loss provisioning among big banks, will adopt both a conservative and aggressive position when it comes to coverage for loan losses.
“Our NPL ratio is at 2.25 percent, it’s slightly up from where it was in June and also from last year (1.52 percent), so for the rest of the year our guidance is that we’re looking at the possibility of hitting around three percent,” Gamboa said in an online media briefing where the bank relaunched its Earnest website banking for its digital-based clients.
As for NPL coverage, she said provisioning as a process is “very dynamic” and it will depend on a lot of conditions and results of its quarterly review of all of their commercial and retail accounts.
Banks have strengthened loan loss provisioning for bad debts. As far as the BSP is concerned, NPL coverage ratio is still “standing comfortably”.
Gamboa said as always, the bank's performance and how it will allot provisioning is aligned to the GDP.
Their decision on whether or not to increase loan loss coverage is a function of how fast the economy will rebound and recover, as well as in resolving the pandemic, when or where the anti-COVID-19 vaccine will be available, for example. “Then, we balance that with our earnings and looking at the direction of the NPLs relative to the economy,” said Gamboa.
“Generally the strategy we would like to adopt is we want to be conservative, we want to be aggressive, we want to get ahead of this as early as possible,” she said. She added that the provisioning that “will happen in the coming quarter up to next year will really be a function of all of these factors combined. If the need arises there will be additional provisioning moving forward.” As of end-September, the bank’s loan loss provisioning was at P35.36 billion.
With a depressed economy, the bank – and the rest of the banking sector – is also experiencing slower growth in loans. The contraction of the GDP because of the COVID-19 has affected bank lending despite that the industry is awash with cash after the BSP injected P1.9 trillion in the financial system through various measures including a cash advance to the government.
“That’s the reason the loan portfolio of the bank has behaved accordingly,” she said. The pandemic has hit the bank hard in the second and third quarters, reporting lower net profits of 48.79 percent as of end-September.
But, according to Gamboa, Metrobank’s capital and liquidity position remains strong and they are one of the more resilient commercial banks around.
“Metrobank is definitely in a very good position to grow alongside the economy because of our balance sheet strength, our capital ratios are very high, our CAR (capital adequacy ratio) is near 20 percent, that’s one of the highest among our peers,” Gamboa stressed. “We do have the capability, we have the capital, we have the liquidity. Our deposit grew 10 percent so far this year.”
On Thursday, the bank introduced the Earnest digital account, a new Metrobank account that anyone can open through its Earnest app.
The bank’s chief marketing officer Digs Dimagiba said its newest digital account offers a higher interest rate than a regular deposit account or up to 1.125 percent per year. It has no maintaining balance and has all the features of a regular deposit account.
Metrobank however is not planning yet on converting its digital-based operations into a full digital banking platform that will have its own BSP license. For now, Earnest is not a stand-alone digital bank, it operates as part of the Metrobank setup.
“We have a positive outlook for digital banking as a sector but right now it’s still too early to tell what and how quickly that’s going to pick up but suffice it to say that Metrobank along with all the other banks that are there, we all have our own digital agendas,” said Dimagiba.
He added, “we were looking at all the implications about the new bank category for digital banks but for now we are looking at strengthening Metrobank as an entity, so therefore Earnest and the Earnest digital account and all the products and services there are products within the main bank.”
As of end-September, about 23 percent of Metrobank’s four million clients are enrolled in their e-channels and they also recorded a 200 percent increase in mobile app downloads during the lockdown period. The percentage of e-channels to total financial transactions went up to 74 percent versus 68 percent in end-September 2019.
With Earnest digital account, Dimagiba is hoping to generate double digit growth in terms of new accounts using digital channels.