Local banking giant Security Bank has obtained a much-coveted investment grade from global credit watchdog S&P Global Ratings in line with an improved credit outlook for local banks and the Philippine sovereign.
S&P upgraded its credit rating on Security Bank to BBB-, the entry-level investment grade rating, from BB+. The outlook on the new credit rating is “stable.”
In its May 2018 report released in Singapore, S&P stated that its rating action on Security Bank followed its review of the Philippine banking sector which concluded that the credit risk facing Philippine banks had been reduced with the establishment of credit bureaus and banks’ improving underwriting practices in the consumer loans segment.
S&P revised its banking industry country risk assessment on the Philippines to group ‘6’ from group ‘7’ due to the sector’s improved credit fundamentals. It cited the positive role of the Credit Information Corp., a centralized credit registry, which has been collecting data on the credit history of borrowers. Participating financial institutions have access to this database and accredited credit bureaus will be able to dispense credit scores and reports.
The credit watchdog believes that this will strengthen the underwriting standards in consumer lending. Over the long-term, S&P expects better transparency to lower bad loans in the consumer business, referring to products to households such as credit cards, personal loans, housing and automobile loans.
S&P upgraded its rating on the bank because it expects the reduced credit risk in the Philippines to “strengthen Security Bank’s capital position and provide a solid buffer against potential losses.”
The “stable” outlook on Security Bank reflects S&P’s view that the bank will maintain its strong capital buffers and good asset quality over the next two years.