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Capital Intelligence upholds Metropolitan Bank and Trust's BB-, B ratings.

BANKING AND CREDIT NEWS-22 February 2010-Capital Intelligence upholds Metropolitan Bank and Trust's BB-, B ratings(C)1994-2010 M2 COMMUNICATIONS

22 February 2010 - Capital Intelligence has reiterated its long-term BB- and short-term B foreign currency ratings of Philippines' Metropolitan Bank and Trust Company (PSE:MBT), or MBTC, in line with the sovereign's ratings.

The agency also decided to maintain the bank's financial strength rating at BB, as well as its support rating at 3.

The outlook is "stable".

MBTC's traditional lending focus has been on corporates, including top tier domestic firms and Japanese companies active in the Philippines given the business connections of the bank's controlling shareholder-the Ty family.

Over the past decade, MBTC has also been expanding into the domestic retail loan market through its branches, as well as Philippine Savings Bank (PSE:PSB), or PSBank, its thrift banking subsidiary in the Philippines.

Retail loans (including mortgages, auto loans and credit card receivables) have increased to account for nearly 20% of the bank's loan book from less than 10% in late 1990s.

However, large corporates remain the bank's major customers, accounting for over 60% of MBTC's total loan book.

In the past few years, MBTC has been concentrating on improving its credit control systems and cleaning up bad loans.

Through further write-offs and disposals, the BankA[cent sign]a'[not sign]a"[cent sign]s NPL ratio decreased to 4.1% at end-September 2009, a level similar to that of other major Filipino universal banks.

Loan loss reserves have also increased and provide more than full coverage for bad loans.

Foreclosed properties (ROPOAs) carried on the bank's balance sheet have also decreased, but the level remains higher than that found at other major universal banks.

And while there is a cost-of-carry associated with these foreclosed properties, MBTC has typically been able to sell these foreclosed properties at a profit.

Liquidity is comfortable, aided by the bank's significant share in the Philippines' retail deposit market.

The majority of surplus resources are invested in government bonds issued by the Philippine government.

MBTC's risk asset ratio improved to 14.49% at end September 2009 through retained earnings and the issue of PHP4.5bn (USD97.5m/EUR71.7m) of ten-year domestic subordinated notes in May 2009.

As with most peer banks, MBTC earned significant gains from securities trading in the first three quarters of 2009.

However, non-interest income remained lower than in the same period of 2008, as the bank sold off fewer foreclosed properties and

recognised lower gains on the sale of ROPOAs.

That said, net interest income continued to grow by 22.4% in the first three quarters of 2009, aided by growth in low-cost CASA deposits.

However, the bank's cost-income ratio remained on the high side, reflecting its large number of branches and generally weaker operational efficiency compared to other universal banks.

MBTC's profitability ratios (ROAA and ROAE) were also just average amongst domestic universal banks.

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Publication:M2 Banking & Credit News (BCN)
Date:Feb 22, 2010
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