All of the country’s top three banks are now rated investment grade by Moody’s Investor Service, reflective of the strength of the Philippine economy that provides for a friendly operating environment.
In a statement over the weekend, Moody’s said it had upgraded BDO Unibank’s Baseline Credit Assessment (BCA) to the firm’s minimum investment grade rating of “Baa3” with a positive outlook.
The positive outlook implies another possible upgrade in the next year and a half.
“The revision of BDO’s BCA… considers the banks’ consistently improving asset quality, as well as robust liquidity and capital profiles, which have become comparable to those of its closest peers in the Philippines and other Baa3 banks in the region,” Moody’s said.
“Furthermore, Moody’s view the credit profile of BDO to be relatively predictable and well positioned to withstand a cyclical downturn among Moody’s rated banks in the Philippines,” the rating firm said.
BDO is the country’s largest bank in terms of resources. The second and third largest banks in the country, Metropolitan Bank & Trust Co. (Metrobank) and Bank of the Philippine Islands (BPI), respectively, had their Baa3 BCA ratings affirmed earlier this month.
In line with our expectation of an improved operating environment, Philippine banks, particularly BDO —given its dominance in the domestic corporate and middle markets segments—will likely benefit from healthy credit growth, core profitability, as well as stable asset quality,” Moody’s said.
BDO’s Bank Financial Strength Rating (BFSR) was affirmed at D+, which is the equivalent of a Baa3 rating, with a stable outlook.
A lender’s BFSR represents Moody’s opinion of a bank’s intrinsic safety and soundness.
Moody’s said BDO’s BFSR rating had a stable outlook. BPI’s and Metrobank’s BFSR ratings have a positive outlook.
The rating firm said BDO would earn another upgrade if and when Philippine sovereign credit ratings are also revised upwards. Moody’s rates the Philippines’ long-term peso and foreign denominated IOUs at Baa3 with a positive outlook.
“Given the positive outlook on BDO’s deposit ratings, an upgrade of the sovereign rating would likely lead to an upgrade of the bank’s deposit ratings, assuming the bank’s own credit metrics remain robust,” Moody’s said. Paolo G. Montecillo