Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

Metropolitan Bank & Trust / Equity Bottom-Up

<p>In our pursuit of opportunity, on the long and short side, some trends are emerging from the 3000 banks that we follow in our model. We still await numbers from Chinese and Taiwanese lenders. However to date, FY19 data show positive fundamental momentum at a number of lenders in Vietnam and Pakistan while banks in Argentina greatly benefit from macro abnormality.</p><p>What interests us here is the robust positive change underway in the Philippines Banking System. It is <a href="https://www.smartkarma.com/entities/metropolitan-bank-trust" target="_blank" data-smartkarma-citation="entities:326:1" rel="noopener">Metropolitan Bank &amp; Trust (MBT PM)</a> which catches the eye in no uncertain terms with strong discrete dynamics while valuation seems reasonable. <a href="https://www.smartkarma.com/entities/security-bank-corp" target="_blank" data-smartkarma-citation="entities:3929:1" rel="noopener">Security Bank (SECB PM)</a> , <a href="https://www.smartkarma.com/entities/rizal-commercial-banking-corp" target="_blank" data-smartkarma-citation="entities:23143:1" rel="noopener">Rizal Commercial Banking (RCB PM)</a>, and <a href="https://www.smartkarma.com/entities/bdo-unibank-inc" target="_blank" data-smartkarma-citation="entities:329:1" rel="noopener">BDO Unibank Inc (BDO PM) </a>all command above average scores though valuations are less appealing.</p><div><p>Metrobank is the country’s premier universal bank and has one of the largest domestic networks with over 950 branches and over 2,300 automated teller machines (ATMs) nationwide, and over 30 foreign branches, subsidiaries and representative offices. At <a href="https://www.smartkarma.com/entities/metropolitan-bank-trust" target="_blank" data-smartkarma-citation="entities:326:1" rel="noopener">Metropolitan Bank &amp; Trust (MBT PM),</a> trends in Profitability, in Efficiency, in Margin, in Provisioning, in Capital Adequacy, and in Liquidity are all pointing in the right direction despite Funding Cost pressures as elsewhere with only Asset Quality a slight negative. The PH Score™ of 9.7 is very high by global standards.</p></div><div><div>
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<p>The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. </p>
<p>With VFM (Valuation, Fundamentals, Momentum), we score banks by PH Score™ , Technicals, and an additional Valuation filter.</p>
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<p>VFM rankings position <a href="https://www.smartkarma.com/entities/metropolitan-bank-trust" target="_blank" data-smartkarma-citation="entities:326:1" rel="noopener">Metropolitan Bank &amp; Trust (MBT PM)</a> in the top quintile of opportunity globally. </p>
<div class="content-highlight"><p>Trading at a 30% discount to BV, with a Franchise Value,  Earnings Yield and Total Return Ratio of 11%, 13.3% and 1.36x, respectively, shares do not appear overextended. The PH Score™ can act as a tailwind.</p></div>
<p>We are mindful of Funding cost pressures, Asset Quality, as well as excessive dependency on trading and FX gains.</p>
<p>In the Philippines, the financial system is bank-centric. Lenders command solid capital and liquidity buffers. They are closely interconnected with corporates with significant business and property loan exposures and mixed-conglomerate structure: this needs to be monitored. The economy is susceptible to external shocks and natural disasters from climate change.</p>
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In our pursuit of opportunity, on the long and short side, some trends are emerging from the 3000 banks that we follow in our model. We still await numbers from Chinese and Taiwanese lenders. However to date, FY19 data show positive fundamental momentum at a number of lenders in Vietnam and Pakistan while banks in Argentina greatly benefit from macro abnormality.What interests us here is the robust positive change underway in the Philippines Banking System. It is Metropolitan Bank &amp; Trust (MBT PM) which catches the eye in no uncertain terms with strong discrete dynamics while valuation seems reasonable. Security Bank (SECB PM) , Rizal Commercial Banking (RCB PM), and BDO Unibank Inc (BDO PM) all command above average scores though valuations are less appealing.Metrobank is the country’s premier universal bank and has one of the largest domestic networks with over 950 branches and over 2,300 automated teller machines (ATMs) nationwide, and over 30 foreign branches, subsidiaries and representative offices. At Metropolitan Bank &amp; Trust (MBT PM), trends in Profitability, in Efficiency, in Margin, in Provisioning, in Capital Adequacy, and in Liquidity are all pointing in the right direction despite Funding Cost pressures as elsewhere with only Asset Quality a slight negative. The PH Score™ of 9.7 is very high by global standards.

The PH Score™ is a fundamental momentum-quantamental score that scores banks according to changes in value-quality. The Score encompasses Profitability, Operating Efficiency, Liquidity, Capital, Asset Quality, and Coverage as well as a valuation variable. Scores lie between 0 and 10, with higher scores representing more positive signs. The PH Score™ was back tested over 2007-17 for global banks and conclusively shows progressively higher returns across quintiles ranked by Score. 
With VFM (Valuation, Fundamentals, Momentum), we score banks by PH Score™ , Technicals, and an additional Valuation filter.

VFM rankings position Metropolitan Bank &amp; Trust (MBT PM) in the top quintile of opportunity globally. 
Trading at a 30% discount to BV, with a Franchise Value,  Earnings Yield and Total Return Ratio of 11%, 13.3% and 1.36x, respectively, shares do not appear overextended. The PH Score™ can act as a tailwind.
We are mindful of Funding cost pressures, Asset Quality, as well as excessive dependency on trading and FX gains.
In the Philippines, the financial system is bank-centric. Lenders command solid capital and liquidity buffers. They are closely interconnected with corporates with significant business and property loan exposures and mixed-conglomerate structure: this needs to be monitored. The economy is susceptible to external shocks and natural disasters from climate change.


Metropolitan Bank & Trust

Metro Bank: Dynamic Numbers