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MOODY’S Investors Service said it could upgrade Allied Banking
Corp.’s local currency subordinated debt rating with its merger
with Philippine National Bank (PNB).
In a statement, Richard Lung, Moody’s analyst,
said Allied Bank’s rating review will focus on whether the merger
will be completed. The review process may last until the completion
of the transaction, which is expected within the next three months,
Lung said.
Lung said it is likely that Allied Bank’s
subordinated debt rating, currently at Ba3, will rise to PNB’s
level of Ba2.
With the rating review, Allied Bank creditors
should benefit from the merged entity as it expands its branch
network and market share. Both banks’ E+ financial strength
ratings will not be affected by the merger, he said.
However, the merger would create goodwill which
must be deducted from the merged entity’s Tier 1 capita, and so
will be more than offset by the active capital raising activities of
both banks before the formal merger.
Moreover, the ratings of the merged bank will
most likely converge to the middle of global peers within the E+
bank financial strength rating, as its financial profile will remain
burdened by PNB’s high level of deferred charges and impaired
assets.
Allied Bank’s financial strength rating is
currently at the high end of the global E+ peers. The Philippine
lender has assets worth P147.8 billion last year, making it the
country’s 12th largest commercial bank.
PNB is the 6th largest bank with P239.7 billion
in assets last year.
As a merged entity, PNB will emerge as the
country’s fourth largest bank with assets of P388 billion.
-- Maricel E. Burgonio
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