Lucio Tan’s Philippine National Bank has matched the dividend yield of the Ty family’s Metrobank. Its protection against bad loans remains another matter.
For income-hunting investors, the contest between two of the Philippines’ oldest banking fortunes has acquired a pleasing symmetry. Philippine National Bank (PNB), controlled by Lucio Tan’s LT Group, and Metropolitan Bank & Trust Company (Metrobank or MBT), the flagship bank associated with the Ty family, now offer virtually identical dividend yields. At the share prices recently displayed—₱58.45 for PNB and ₱66.40 for Metrobank—each yields about 7.53%.
The equality is mathematically tidy. PNB has announced a dividend of ₱4.40 per share for 2026: two regular payments of ₱1.65 each and a special dividend of ₱1.10. Metrobank has declared a dividend of ₱5.00 per share, consisting of ₱3.00 in regular dividends and ₱2.00 in a special payout. Divide each distribution by its respective share price, and the result is almost indistinguishable: 7.528% for PNB and 7.530% for Metrobank.
Yet equal yields do not make equal banks. The contrast becomes less flattering to PNB when attention shifts from what the banks return to shareholders to what they have reserved against borrowers who may not repay them.
As of March 31st 2026, Metrobank reported a non-performing-loan ratio of 1.75% and an NPL coverage ratio of 137.1%. In other words, Metrobank had about ₱1.37 of loan-loss reserves for every ₱1 of reported non-performing loans. The bank described its portfolio health as intact and noted that its NPL ratio remained well below the Philippine banking industry’s 3.44% as of February.
PNB’s corresponding figures were markedly weaker. Its gross NPL ratio stood at 4.8%, while NPL coverage was 78.4%. Thus, PNB had roughly 78 centavos of reserves for each peso of bad loans. Its net NPL ratio, after allowances, was 1.8%, but comparing that figure with Metrobank’s gross ratio would obscure rather than illuminate the difference. Before reserves are deducted, PNB’s reported incidence of problem loans was approximately 2.7 times Metrobank’s.
The provision puzzle
More concerning than the gap itself is its direction. PNB’s gross NPL ratio has improved from 5.5% in March 2025, suggesting that the bank has made progress cleaning up its legacy loan portfolio. But the ratio edged up from 4.7% at the end of 2025 to 4.8% three months later. The net NPL ratio rose from 1.6% to 1.8% over the same period. Meanwhile, NPL coverage declined from 87.6% in March 2025 to 82.3% in December and then to 78.4% in March 2026. The stock of problem loans has become better than it was a year earlier; the reserve cushion protecting against that stock has nonetheless become thinner.
PNB’s first-quarter provisioning did little to reverse the trend. The bank recognized only ₱225.7m in impairment, credit and other losses, down 18.6% from ₱277.1m a year earlier. That charge was equivalent to barely 0.03% of its ₱755.9bn net loan book for the quarter. Management attributed the reduction to improved credit-portfolio performance.
Metrobank took a different approach. It booked ₱3.37bn of credit and impairment provisions, up 29.4% year on year and equivalent to about 0.17% of net loans. Much of the charge arose in consumer banking, partially offset by reversals in the corporate portfolio. Metrobank’s provisioning was therefore not merely larger because Metrobank itself is larger; relative to loans, the quarterly charge was more than five times PNB’s.
This does not automatically mean that PNB is under-provisioned. Loan-loss coverage does not measure collateral, and PNB’s non-performing exposures may be backed by land, buildings or other assets whose recovery value is not fully captured by the headline ratio. PNB also has a formidable capital cushion: its consolidated Common Equity Tier 1 ratio was 18.0%, and its total capital-adequacy ratio was 18.8% at the end of March. These were well above Metrobank’s corresponding 14.2% and 14.9%.
Capital, however, is the final shield; provisions are the first. Using excess capital to absorb credit losses is rather less attractive than recognizing adequate reserves through the income statement. PNB’s thick capital base may ensure resilience, but it does not remove the earnings cost that would arise if management eventually had to increase provisions.
A costly race to catch up
For PNB to raise coverage from 78.4% to Metrobank’s 137.1%, it would need either a large reduction in NPLs, a substantial increase in loan-loss allowances, or some combination of the two. At the present pace of provisioning, convergence appears unlikely to happen quickly.
Indeed, the dividend and provisioning decisions pull in opposite directions. PNB’s announced ₱4.40-per-share distribution represents approximately ₱6.71bn across its 1.526bn outstanding shares. That is slightly more than the group’s ₱6.37bn of first-quarter net income, though comparing a full-year dividend with one quarter of earnings is not a payout-ratio calculation. The point is one of allocation: cash returned to shareholders is cash that cannot simultaneously strengthen reserves or finance loan growth.
PNB can afford the distribution because it is heavily capitalized. Its equity amounted to ₱238.5bn at the end of March, equivalent to nearly 18% of assets. Metrobank’s equity-to-assets ratio was much lower, at roughly 11%, reflecting a more leveraged banking model. PNB is hardly short of financial ballast.
But the source of PNB’s first-quarter earnings also deserves scrutiny. Net income rose 4.5% to ₱6.37bn, supported by a 5.8% increase in net interest income and a lower funding bill. Yet the bank also recognized ₱1.55bn of gains from selling or exchanging assets, including substantial gains on property and equipment. Those gains more than offset a ₱611m loss on trading and investment securities. Such disposals produce real profits, but they are less dependable than recurring interest and fee income.
Metrobank’s earnings machine is larger and more conventional. First-quarter net interest income climbed 13.6% to ₱33.4bn, while fee and trust income increased 11.8% to ₱5.1bn. Net income attributable to shareholders reached ₱12.6bn. Its larger provision charge restrained profit growth, but it also helped preserve a reserve buffer comfortably above the entire reported NPL balance.
Same income, different insurance
For now, shareholders can collect virtually the same percentage yield from either bank. PNB even offers the stronger regular yield: its ₱3.30 regular dividend equates to about 5.65% at ₱58.45, compared with 4.52% for Metrobank’s ₱3.00 regular dividend at ₱66.40. Metrobank relies more heavily on its special dividend to reach the shared 7.53% headline yield.
But dividends are not merely rewards; in banking, they are also claims on capital that could otherwise absorb risk. PNB has matched Metrobank in the generosity visible to shareholders, not yet in the provisioning prudence visible to creditors and analysts.
Closing the coverage gap is possible. PNB could accelerate write-offs, dispose of collateral, cure or restructure delinquent accounts, or book larger provisions. Its ample capital gives it room to do so. Yet unless bad loans decline sharply, its present trickle of provisioning is unlikely to lift coverage rapidly from 78.4% towards Metrobank’s 137.1%.
The dividend race has ended in a draw. The race to ensure the loan book has not. For PNB’s investors, the 7.53% yield is compensation worth collecting—but the missing 58.7 percentage points of NPL coverage are worth watching.
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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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