Metrobank redeeming P16 B debt ahead of schedule

Metropolitan Bank & Trust Co. (Metrobank) is redeeming P16 billion in debt notes ahead of scheduled maturity to avoid paying a step-up interest rate.

In a disclosure to the Philippine Stock Exchange (PSE), Metrobank said the bank’s board of directors approved to exercise the call option on the subordinated debt on June 27 in accordance with the terms and conditions of the note issuance.

Metrobank raised P16 billion from the issuance of debt notes in March 2014 in compliance with the Basel III capital framework imposed by the Bangko Sentral ng Pilipinas (BSP).

The debt notes qualifying as Tier 2 capital are due June 27, 2024 and carried a coupon rate of 5.375 percent for the first five years.

The publicly-listed bank said the call option is subject to the central bank’s approval.

Metrobank also raised another P6.5 billion from the issuance of notes due August 2025 in July 2014 to comply with the capital adequacy standards under Basel III. This completed the $500 billion Tier 2 notes issuance of the listed bank.

The BSP required universal and commercial banks or big banks to adopt the capital adequacy standards under Basel III in January 2014 to improve the ability of banks to absorb losses, extend the coverage of financial risks, and build stronger firewall against periods of stress.

Basel 3 is a set of reforms introduced by the Basel Committee on Banking Supervision in the wake of the 2008 global financial crisis.

Aside from Metrobank, other banks that issued Tier 2 notes include Philippine Savings Bank with P3 billion, East West Banking Corp. with P5 billion, BDO Unibank Inc. with P10 billion, Asia United Bank with P5 billion, and East West Rural Bank with P1.25 billion.

Late last year, Metrobank raised P28 billion from the issuance of fixed rate notes as part of its P100-billion bond and commercial paper program.

It also raised P60 billion from the sale of new shares to existing shareholders led by GT Capital Holdings through a stock rights offer last April to further enhance its capital ratios, keeping it well above the Basel III requirements.

It is also raising P25 billion from the issuance of long-term negotiable certificates of time deposits (LTNCDs). The bank has so far raised P26.65 billion from previous issuances of LTNCDs including P8 billion in October 2014, P6.25 billion in November 2014, P8.65 billion in September 2016, and P3.75 billion in July last year.

Earnings of Metrobank surged by 27 percent to P16.75 billion in the first nine months of last year from P15.36 billion in the same period in 2017 on the back of the solid performance of its core businesses.