METROPOLITAN Bank & Trust Co. (Metrobank) is looking to increase the share of consumer loans in its total loan portfolio to help offset narrowing margins amid the Philippine central bank’s ongoing easing cycle.
Metrobank Head of Investor Relations Minda Claver A. Olonan said in an online briefing on Thursday that the listed lender is focused on growing its retail loan portfolio.
“Increasing the consumer [segment’s] share would help us improve the stability of the net interest margins (NIMs), as well as increase current fee income base,” Ms. Olonan said.
The bank targets to bring the share of consumer loans in its total loan book to 25%.
This would help it reach its target return on equity (RoE) and return on assets of 15% and 2%, respectively, in the medium term, Ms. Olonan said. As of March, Metrobank’s return on equity was at 12.85%, while return on assets stood at 1.4%.
Increased consumer loans would also help drive an increase in the bank’s loan-to-deposit ratio to around 85% in the medium- to long-term from the current 82.5%, she added.
The bank does not expect a substantial increase in nonperforming loans even as it increases its exposure to the consumer space, Ms. Olonan said.
“We do a lot of pilot testing to make sure that all the risks are taken account of and these new products will not significantly affect the overall health of the portfolio. That’s why the expansion is actually on a gradual phase and all the new products are tested, especially if you’re going to another market segment,” she added.
Metrobank Treasurer and Head of Financial Markets Sector Fernand Antonio A. Tansingco said at the same briefing that the increase in their RoE could be driven by several factors.
“One is the increased leverage of our balance sheet. As you know, we are rightsizing our capital. So, with the correct amount of capital vis-a-vis the risk that we’re taking, we think that we can increase RoE,” Mr. Tansingco said at the same briefing.
“Number two is that we’re improving efficiencies with the tail end of our efficiency measures, including automation, changing of our core banking system, and a refresh of our operation system. This will improve the efficiencies of our operations. And the third is expansion of market share — getting more clients on board, getting a bigger share of wallet for the industry, and riding the growth trends of the Philippine economy,” he added.
Metrobank is also looking to increase the share of longer-dated bonds in its portfolio to help cushion the expected compression in margins, Mr. Tansingco said.
“We are buying long-dated government securities… because that would enable us to lengthen duration at the same time maintain the liquidity… We feel that we’re also quite aggressive on long-dated assets such as mortgages, term loans to our customers.”
Mr. Tansingco said they remain positive on the outlook for the Philippine economy despite some risks caused by external developments, adding that the government’s infrastructure push could help drive their loan growth.
“A big chunk of our loan growth is large loans to corporates as they expand their capacity right after the hiatus caused by the uncertainties after the pandemic and the US and global trade wars. But they’re going back on stream, and we expect more demand… as they improve their capacity and try to anticipate the growth of the Philippine economy,” he said.
“In summary, given the current market conditions, we see some opportunities and potential headwinds in the coming months. Among the positives, we are hopeful of continued recovery in corporate capex (capital expenditures) and discretionary consumer spending… What could put this at risk could be weaker macro conditions such as renewed inflationary pressures and some volatility in the exchange rate, which could affect consumer and business sentiment.”
He added that geopolitical and financial stability risks could affect domestic markets.
“On the domestic front, the more intense competition in both assets and liabilities could also affect margins and overall profitability. Amidst these challenges, the bank’s high NPL cover would allow flexibility for us to manage potential risks as well as credit costs. Also, our strong capital and liquidity position… will help us continue to support loan demand and efforts to improve shareholder returns,” Mr. Tansingco said.
Metrobank’s net income rose by 2.13% year on year to P12.253 billion in the first quarter on the back of strong growth in its fee and trading income and the sustained expansion of its lending business.
Its shares closed at P78 apiece on Thursday, down by P1.60 or 2.01% from the previous day. — A.M.C. Sy
