Metrobank in Q3: Margin recovery constrained by credit cost, opex pressures

3Q26 net income hit P11.4 billion, -8% YoY and -7% QoQ. 9M26 total at P36.3 billion (-3% YoY), which is in-line with expectations, i.e. 72% and 75% of Street and AB Capital's FY26E. Institutional loans grew 14%, although management noted that part of the expansion reflects elevated inventory and financing costs.

MBT's 3Q26 net interest margin (NIM) improved 9 basis points QoQ to 3.94%, supported by faster asset repricing and its 61% current account savings account (CASA) ratio, though we think repricing benefits have a limited window. We raised NIM forecasts, supported by securities redeployment and expensive deposit runoff.

Credit normalization remains gradual. 9M26 credit costs reached 79 basis points, with 3Q at 88 basis points and consumer non-performing loans (NPLs) at 5.2%, including cards at 7.3%. We raised 2026-27E provisions by 13-17%, although healthy 132% coverage provides some protection against further deterioration.

Maintain NEUTRAL, lowering our dividend discount model (DDM) target to P68 from P73 and trimming 2026-27E earnings by 1% and 5%. Despite 0.7x price-to-book (P/B), the 52.9% cost-to-income ratio (CIR), following 12% operating expense growth, and 11.7% return on equity (ROE) limit near-term rerating potential.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.

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