Moody's: Metrobank's sale of power business to Japan's ORIX credit positive

Ty-led Metrobank Group's P7.15-billion share sale of its power generating business to Japan's ORIX Corp. is credit positive to Metropolitan Bank & Trust Co., global debt-watcher Moody's Investors Service said Monday. 

 

“This sale is credit positive for MBT (Metrobank) because we estimate its consolidated Tier 1 capital ratio will increase to 15.3 percent from 14.8 percent at the end of March, after factoring in the gains from the share sale,” Moody's said in a statement. 

 

These compare with the 14.7 percent average Tier 1 ratio of Philippine banks as of end-March, according to Moody's. 

 

Tier 1 capital—consisting of common stock, retained earnings, and non-redeemable non-cumulative preferred stock—measures a bank's core financial strength from a regulator's point of view. 

 

Last June 27, Metrobank Group investment vehicle First Metro Investment Corp. said proceeds of its sale of a fifth of Global Business Power Corporation to ORIX will support Metrobank in raising funds to meet requirements of Basel III starting Jan. 1, 2014. 

 

Basel III introduces complex reforms in measuring a bank's financial strength, and is designed to improve the ability of bank capital to absorb losses and have stronger firewalls against periods of stress. 

 

Moody's explained that Metrobank's disposal of holdings in Global Business Power will “avoid a punitive deduction in its Tier 1 capital that results from equity investments in non-financial entities under the new Basel III capital framework to be implemented next year.” 

 

Metrobank's holdings in Global Business Power would have cut its Tier 1 ratio to 13.6 percent under the new capital regime, the debt watcher said. 

 

“From a strategic perspective, the transaction reflects MBT’s proactive efforts to dispose of non-core assets and free up capital in preparation for business growth and higher capital requirements under the new Basel III regime,” the statement read. 

 

Metrobank gave up stakes in Toyota Motor Philippines to GT Capital Holdings Inc., the Ty group's holding firm, through two separate transactions—December 2012 and January 2013—totaling P9 billion. 

 

Moody's rates Metrobank at Ba1 or one notch below investment grade for long-term local and foreign currency deposits. The debt-watcher gave the bank a stable outlook. — Siegfrid Alegado/VS, GMA News