Now in its 50th year, Metrobank is enjoying unprecedented growth and is opening new branches to keep up with demand
Metropolitan Bank & Trust Co is the Philippines’ premier universal bank and ranks among the foremost financial institutions. Last year the bank broke its own record when it reported a net income of P11 billion (£160.9 million) – nearly 32 per cent higher than the income for 2010. As impressive as this may be, the figure is in fact lower than the average annual income growth of 36.5 per cent that the bank has reported in the past four years.
Nevertheless, the first quarter of 2012 shows greater promise for the current year: net income was P4.3 billion, up nearly 39 per cent compared to P3.1 billion reported in the same period last year. Bank management attributes this growth to robust gains from treasury and investment activities. Similarly, credit grew by 10 per cent in January-February 2012 thanks to strong demand across all sectors.
Such positive activity and growing demand has obliged Metrobank to open more branches, raising the number to over 800, which are complemented by 39 foreign branches, subsidiaries and representative offices. Furthermore, its network of cash machines has recently passed the 1,600 mark.
Solid growth can be seen across the board elsewhere, as well. Total operating income has swelled to P16.6 billion, while net interest income rose to P7.8 billion. Net loans and receivables grew 18 per cent, whilst low cost deposits increased 11 per cent.
Meanwhile, Metrobank also enjoys a high capital adequacy ratio (CAR) of 18.5 per cent and a Tier 1 ratio of 17.4 per cent, meaning it is well ahead of the ratios the central bank has proposed under the Basel III.
Arthur Ty, former bank President, stepped in to replace his father as Board Chairman in April this year. Here, he shares his views on Metrobank’s growth strategies.
After witnessing huge growth in the past few years, what approach is the bank going to take over the coming years?
Over the last six years, at Metrobank we have not really focused too much on growth. We really felt that it would serve us better if we focused on strengthening the bank’s foundations first, particularly the balance sheet, the capital and the quality of the assets. I feel that this is something we’ve done very well and we’ve been rewarded with a good product and share prices, which means that our investors recognise this.
Moving forward, we ask ourselves: what will we do with such a strong balance sheet? For us, it really is about growth. We’ve always been known as one of the most aggressive banks in the mid-90s and into the 2000s. So, I think it’s time to go back to that approach and try to capture more of the market.
What do you need to do to protect your market share?
We think better than the other guys. Banking is fairly generic. It is fairly undifferentiated and so you have to find a way to differentiate yourself from everybody else. For us, our roots are really in middle market and commercial lending. Furthermore, we are all about the relationship with clients. Some of these relationships span almost 50 years; we have original clients from when the bank first opened. I think that is a very important strength of the bank.
This country has a very young population. In terms of consumer growth, it would be sensible to capture this market demographic. Is this part of your strategy in terms of future growth?
One of the strongest growth areas for us in the last three years has to do with consumer banking. It involves credit cards, housing and auto loans. I think a lot of that is associated with overseas Filipino workers remittances and the Business Process Outsourcing sector, because really that is where a lot of the spending or their purchasing power is coming from. Yes, it is something that we’re quite keen on.
How important are remittances for Metro-bank’s business?
We have remittance offices abroad in London, Italy and Austria, for example. But based on our experience that whole market is changing. Before, you used to be able to open offices and capture a pretty large segment. But what we are seeing now is that it’s becoming much more decentralised. Many locals have started opening their own remittance companies and now the banks have a much smaller share.
There is also a big change in behaviour. Before, you would open a branch and on Sundays everybody would come and there’d be huge numbers of people sending money. Now they just go to their neighbourhood grocery store that collects on behalf of Metrobank, or BDO or RCBC or whoever it is, and they do not have to come to your office anymore. In some cases or in some countries, having an office actually becomes a liability because you aren’t as mobile as the competition. It is really more about working, I think, with the sort of imbedded local players. This is something that we are pursuing.
Mr Tetangco, Governor of the Central Bank, has stated that he wants the banks to give more loans and credits. Do you believe that the commercial banks need to lend more or that they are lending enough already?
I can’t speak for the other banks, but we want to lend as much as we can to clients that we feel are good risks. We’re always going to be limited by several things. One is the amount of coverage that we have, and in that sense I feel that we can improve on that so we are actually expanding our frontline.
Secondly, it has something to do with the amount of available credit information there is in the country. We’re not like Hong Kong or other more developed countries, so I think risk-wise there is a little bit more risk here but we try to do what we can. The third and probably the most important one is how fast the economy grows. Banks are always going to be a proxy for the economy. If the economy is growing at 45 per cent and our loan portfolio growth last year was about 65 per cent, I’d say that is not too bad.
In any other country that would be risky.
But you know, when we talk to investors, and I do on a regular basis, one of the things that I always ask is if their loans-to-deposit ratio is in the mid-50s. This is very low. Chinese banks now are at 75 per cent because they are forced by regulations. Korean banks are probably over 100. Sixties and 50s are pretty low for the region. But I think this is a reflection of two things: for one the Philippines is very liquid. There is too much cash. Secondly, there aren’t enough places to put it. There isn’t enough loan demand that is acceptable to banks.
I think more than half the population in this country is actually un-banked. If all you wanted was loans, you could probably go out and lend to everybody and really drive that number up, but then it wouldn’t make sense.
When being part of a generation on which the flag of entrepreneurship seems to be constantly waving in the sea of young professionals looking to succeed in the business world, more often than not, we tend to drown in the... Read More