Metrobank unperturbed by US subprime market woes

The Metropolitan Bank and Trust Co. (Metrobank) is still confident it can hit its 2007 full growth targets despite the negative impact of the US subprime market aftershocks.

However, Metrobank president and chief executive officer Arthur Ty admitted that its planned float of lower Tier 2 capital worth P10 billion, remains dependent on developments in the global financial markets.

“At the moment, there are no serious signs that may change or affect our targets,” he said.

But Ty confessed events unfolding in the offshore market may have negative trickle down effects on the bank’s debt instrument issuance. “We are assessing if the (global financial) volatility will hit us,” he said.

Metrobank has collaterized debt obligations (CDOs) but these are not affected by the present volatility.

“We only have $80 million worth of CDOs and these are supported by underlying prime collateral,” the bank president revealed.

Bangko Sentral ng Pilipinas (BSP) Governor Amado M. Tetangco Jr. made it clear that the country’s banking system has mininal amounts of CDOs, and that majority of the CDOs are backed by high rated assets.

“The CDO assets currently held by banks are A-rated and higher, indicating no risk of a direct impact on the bnaking sector,” Tetangco said.

The problems affecting the Philippine market today is external in nature.

Tetangco was confident that since the market has sifficient liquidity. “The increased availability of longer term funding in pesos has also reduced the country’s vulnerability to adverse external market development.”

Meanwhile, Ty said that the problem was external in nature and that the bank’s operations remain generally unaffected. He advised that risk-adverse investors can temporarily park their investments in bank deposits while weather the uncertainties.

Metrobank reported a P3.7-billion consolidated net income in the first semester of the year, a 34.3 percent year-on-year jump from P2.75 billion in the same period the year past.

The bank is raising the P10-billion new money to refinance its $125 million Tier 2 issue callable this coming November.

Prior to the global financial meltdown, the bank management believed the refinancing will allow Metrobank to save on the cost with the prevailing low interest rate environment.

In fact, it was explained that Metrobank’s portfolio, consisting of investment grade tranches, has yielded substantial good returns for the lender despite the tailspin in the US subprime mortgage market since these are backed by investment grade underlying credits.

The bank’s portfolio is reviewed monthly by Moody’s Investors Service, an international credit rating firm, for impairment or deterioration of credit quality.