Philippine banks to raise more capital to meet Basel 3 guidelines

Maybank says capital instruments issued in 2011 will be qualified until 2015 but older issuances will be ineligible.

According to Maybank Kim Eng, as per the Basel 3 guidelines, banks will have to maintain common equity Tier 1 (CET1) ratio of 8.5%, Tier-1 ratio of 10% and capital adequacy ratio (CAR) of 12.5%. These ratios all include a conservation buffer of 2.5%. 

Here's more from Maybank Kim Eng:

The new standard features more deductions and prudential filters at the CET1 level. Moreover, existing hybrid Tier 1 capital will no longer be eligible. As such, we might expect capital-raising from banks.

Capital instruments issued in 2011 will be qualified until 2015 but older issuances will be ineligible. We estimate 35% of current subordinated debt qualify. Banks are expected to retire old debts and issue new ones.

Based on our computation, local banks meet the minimum 8.5% CET1 ratio. We remain positive on the industry’s growth prospects. Our top picks in the sector are Metrobank (MBT) and Security Bank Corp (SECB).