Debt watcher Moody’s Investors Service affirmed the deposit ratings of the Bank of the Philippine Islands (BPI) and Metropolitan Bank and Trust Co. (Metrobank or MBT), saying that the ratings outlook for two of the country’s biggest banks remains positive.
In a statement on Friday, Moody’s announced that it has affirmed the Baa3/Prime-3 deposit ratings of BPI and Metrobank.
Baa3 is Moody’s long-term rating for banks with some speculative elements and moderate credit risk, while Prime-3 is given to banks with acceptable ability to repay short-term debt.
The debt watcher also revised the outlook of the D+ standalone bank financial strength ratings (BFSRs) of BPI and Metrobank—equivalent to a baseline credit assessment (BCA) of baa3—to positive from stable.
As a result, Moody’s said that Metrobank’s Ba1 rating for local currency subordinated debt and Ba3 rating for foreign currency preferred stock were also revised to positive from stable.
“The positive outlook on BPI’s and MBT’s D+ BFSRs reflects improvements in their standalone credit profiles, and Moody’s expectation that the credit metrics of these banks will continue to improve over the next 12 to 18 months,” it stated.
It said the banks’ D+ BFSR is equivalent to a baseline credit assessment (BCA) of baa3, viewing the banks’ financial profiles to be strong for their baa3 BCA.
Moody’s said that the banks’ BCA takes into account their “consistently robust capital and liquidity profiles, which reflect discipline and prudence in business growth.”
The debt watcher said it expects BPI and Metrobank to maintain capital levels well above the minimum capital requirements under Basel III.
Basel III is a framework designed to strengthen the banking sector’s capacity to absorb shocks, enhance risk management, and increase transparency. The Bangko Sentral ng Pilipinas has ordered universal and commercial banks in the Philippines to comply with Basel III’s 10-percent capital adequacy ratio standards with Tier 1 common equity, and Tier 1 capital ratios of 6 percent and 7.5 percent, respectively, and a capital conversion buffer of 2.5 percent by January 2014.
Meanwhile, Moody’s said it expects an improvement in the operating environment of the Philippine banking system on account of robust economic growth and stabilizing external conditions.
“In line with this expectation, Philippine banks, particularly BPI and MBT—given their dominance in the domestic corporate and consumer segments—will likely benefit from healthy credit growth, core profitability, as well as stable asset quality,” it stated.
Moody’s also viewed the credit profiles of BPI and Metrobank to be “among the most defensive and best positioned to withstand a cyclical downturn among Moody’s rated banks in the Philippines, as well as similar-rated banks in the region.”
BPI reported total assets of P1.2 trillion in December 2013, while Metrobank had P1.4 trillion in total assets last year.