Four banks are set to receive credit-rating upgrades from Moody’s Investor Service, with the Philippines’ own sovereign rating now on “positive” watch.
In a statement, Moody’s announced that local and foreign currency debt ratings for BDO Unibank Inc., Metropolitan Bank and Trust Co., Bank of the Philippine Islands and Land Bank of the Philippines were being reviewed for an upgrade.
This followed a similar move for the long-term foreign and local currency bonds of the Philippine government, which are currently rated a notch below “investment grade.”
“The credit strength of the government is an important input in our assessment of the government’s capacity to provide support in times of stress,” the Moody’s statement read.
In addition to considering the government’s capacity to provide support, which is reflected primarily by the government’s own rating, Moody’s said its assessment would also take into account the systemic importance of each bank, which would influence the government’s willingness to extend support in times of financial tightness.
In assessing the systemic importance of each of the banks, Moody’s said it would consider factors including the bank’s market share of system deposits and loans and the bank’s role in the country’s payment system.
The government’s ownership in banks could also impact Moody’s view of the government’s willingness to provide extraordinary support to the banks.
Moody’s said it expected to conclude the review of the affected banks’ ratings over the next three months, upon the conclusion of the review of the Philippine sovereign debt rating.
“The review for upgrade of BDO’s, BPI’s, LBP’s and MBT’s ratings reflect our assessment that these ratings would likely benefit from an additional notch of systemic support uplift in the event that the parallel review of the Philippine sovereign debt rating concludes with a rating upgrade,” Moody’s said.