Rising interest rates seen to benefit Metrobank

By Ana Olivia A. Tirona, Researcher

INVESTORS placed their bets on financial companies like Metropolitan Bank & Trust Co. (Metrobank) amid a rising interest rate environment that could push profits higher this year.

Data from the Philippine Stock Exchange showed the Ty-led Metrobank trading P653.91 million worth of 14.14 million shares from July 18 to 22, making it the 10th most actively traded issue last week.

It went up by 0.6% or 30 centavos to close at P46.70 apiece last Friday from P46.40 on Thursday. On a week-on-week basis, Metrobank dipped by 1.1% from its closing price of P47.20 per share on July 15.

Year to date, the bank’s share price was down by 13.5%.

Stocks in the financial sector, which includes Metrobank, performed “good” last week after Bangko ng Sentral ng Pilipinas (BSP) announced a surprise rate hike to battle inflationary pressures in the week before, Mercantile Securities Corp. Analyst Jeff Radley C. See said in an e-mail.

The financials subindex was flat week on week as it finished at 1,502.18 on Friday from 1,502.41 on July 15.

The BSP increased its key rate rates in an off-cycle meeting last July 14 by a record 75 basis points (bps) to 3.25%, bringing it back to March 2020 level. Rates on the overnight deposit and lending facilities were also hiked by 75 bps to 2.75% and 3.75%, respectively.

The central bank has made a total of 125 bps rate hikes so far this year.

BSP Governor Felipe M. Medalla has signaled he would not rule out another rate hike at its next policy meeting in August.

“Investors with [a] relatively higher appetite for risk considered certain plays in the Philippine banking sector, as a number of tailwinds — from better margins due to rising interest rates to new opportunities emerging from the ongoing push to go digital — are seen as a boon to the sector given higher fee-based income and savings growth,” Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a separate e-mail.

Mr. Arce said larger banks like Metrobank are “safer bets” and will likely benefit most in the rising interest rate environment as a large chunk of their deposits is unlikely to be repriced upwards in line with loans.

“Metrobank is one of the top picks as net interest margins expand and loan growth accelerates as the economy continues to recover amidst relaxed COVID-19 restrictions,” Mr. Arce added.

Furthermore, Mr. See said that Metrobank being recognized as “Best Bank in the Philippines” at the Euromoney Awards of Excellence 2022 may have been a “bonus” in terms of positive sentiment on the company.

Euromoney said the bank’s performance was commendable in the past year faced with uncertainty, as it still recorded “strong capital and asset quality.”

Euromoney also focuses on the following key metrics for a company to win the category: market capitalization, total revenues, pre-tax profit, net income, return on tangible common equity, return on assets, net interest margin, cost-to-income ratio, Basel III Tier 1 capital, market share of deposits, market share of loans, and loan-to-deposit, nonperforming loan (NPL) and NPL coverage ratios.

Likewise, Metrobank has expanded its partnership with remittance company Pera Hub to allow fund transfer services to its users.

The new service allows persons who intend to send cash to a Metrobank client to go through Pera Hub branches.

Bank transfers, with a transaction fee of P100, can range from P100 to P25,000. Recipients can withdraw the cash from a Metrobank automated teller machine or through over-the-counter processes.

Pera Hub is the retail network brand of PETNET, Inc., a transaction network with over 3,000 locations nationwide. Aside from remittance, Pera Hub offers products and services such as money changing, payment transactions and micro-insurance, among others.

Mr. See said investors are anticipating a “good” second-quarter earnings report.

Meanwhile, Mr. Arce estimated the bank to reach P8.3 billion in net income in the second quarter and to finish the year at P28.4 billion.

The Ty-led bank was the third largest lender in the country in terms of total assets in the first quarter, central bank data showed.

Metrobank’s net income increased by 3.4% year on year to P8.104 billion in the first quarter. Its net income attributable to equity holders of the parent company likewise edged up by 2.6% to P7.986 billion.

Mr. See expects the bank’s support level to sit at P44.60 and resistance at P47.50 this week, while Mr. Arce placed its support at a range of P46.00 to P45.60 and resistance between P48.00 and P50.00.