PH banks get ratings boost; lower interests seen due to upgrade
Four major local banks have received higher credit ratings from Moody’s Investor Service, following the upgrade of the Philippine government’s sovereign debt upgrade this week.
The upgrade announced Thursday in the credit standing of BDO Unibank Inc., Bank of the Philippine Islands (BPI), Metropolitan Bank & Trust Co. and Land Bank of the Philippines, should result in lower borrowing costs, which could be passed on to consumers in the form of lower interest rates.
“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, and we believe that due to their systemic importance, these four banks are more likely to fully benefit from the higher rating of the government,” Moody’s said in a statement.
The outlook “on these banks’ deposit ratings is positive, in line with the positive outlook of the sovereign bond rating,” it added.
BPI’s and Metrobank’s baseline credit assessments (BCA) are now rated “Baa3”—the same investment grade as the Philippines’ sovereign debt. BDO’s and Landbank’s BCA ratings, meanwhile, were upgraded one notch to “Ba1,” just below investment grade.
Moody’s cited the strong domestic consumption that has been supported by steady remittance inflows, which in turn “contributed to the banks’ healthy credit growth and profitability.”
Moody’s also noted well-anchored inflation and no strong signs of overheating in asset markets, which underpin the banking system’s improved asset quality.
“All of these positive dynamics of the operating environment have resulted in the upward revisions of the BCAs of BPI, Metrobank and BDO,” it said.
The ratings firm added that, because of the improved creditworthiness, the Philippine government now has a stronger capacity to support banks.
Moreover, the outlook on all four banks’ deposit ratings are positive, reflecting Moody’s expectation that further upward pressure on the Philippine government’s rating may result in upward movements on these four bank ratings given Moody’s support assumptions.
