Sale of 20% stake in Metrobank power unit ‘credit positive’ – Moody’s

MANILA, Philippines - International rating firm Moody’s Investors Service said Metropolitan Bank & Trust Co.’s decision to sell 20-percent stake of its power subsidiary Global Business Power Corp. to Japan’s Orix Corp. is “credit positive” for the bank.

In a statement, Moody’s said the sale would further improve the bank’s capital ratio.

“This sale is credit positive for 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. Such a ratio compares with the 14.7-percent average Tier 1 ratio at the end of March for the Philippines-based banks we rate,” it said.

“Another credit positive is that the disposal allows Metrobank to 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,” it added.

Moody’s estimated that if Metrobank had retained its current stake in GBPC, its Tier 1 ratio would decline to 13.6 percent under the new capital regime, based on March 2013 financials.

From a strategic perspective, the credit watcher said the transaction reflects Metrobank’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.

“We understand that management plans to dispose of its remaining 29-percent stake in GBPC by the end of 2013. The bank had previously sold its holdings in Toyota Motor Philippines to GT Capital via two separate transactions, one in December 2012 and the other in January 2013, for a total of P9 billion,” it said.

The latest sale, Moody’s noted, continues the bank’s strategy of monetizing its non-core assets and deploying capital to fund its core lending business.