S&P keeps DBP ratings

MANILA, Philippines – Standard & Poor’s (S&P) Global Ratings has affirmed the credit rating and outlook of state-run Development Bank of the Philippines (DBP) as it continues to play a critical role in supporting the country’s economic and social development.

Nikita Anand, credit analyst at S&P, said the debt watcher affirmed DBP’s ‘BBB’ long-term and ‘A-2’ short-term issuer credit ratings on the back of a stable outlook on the bank’s long-term rating.

“The affirmed rating on DBP reflects the Philippine government’s full ownership of, and strong support for, the bank,” Anand said.

The ratings on DBP are at par with the sovereign credit ratings on the Philippines at ‘BBB’ or two notches above investment grade on the back of a stable outlook.

She pointed out DBP plays a critical public policy role in supporting the economic and social development of the Philippines and has an integral link to the government.

“Therefore, we see an almost certain likelihood that the government will provide timely and sufficient extraordinary support to DBP in the event of financial distress,” she added.

Anand said S&P upgraded its assessment of DBP’s capital position to adequate from moderate following the government’s injection of P5 billion of capital to support its policy lending role.

Likewise, she said the debt watcher expects DBP’s pre-diversification risk-adjusted capital (RAC) ratio to remain above seven percent in the next 18 to 24 months.

“Our forecast is based on our assumption that DBP’s loans will grow 10 to 12 percent per annum and that the bank will sustain its profitability at the current level,” she added.

According to her, the stable outlook on DBP reflects the outlook on the Philippines.

“We expect DBP to remain an important instrument for the government in its medium-term development strategy. We also believe that the bank will sustain its public policy role over the next two years,” Anand said.

The analyst pointed out the rating on DBP would move in tandem with the country’s sovereign rating.

“Any significant change in government policy that affects DBP’s critical role or integral link would also affect the rating,” S&P said.

Earnings of DBP were slightly higher at P4.7 billion last year from P4.6 billion in 2014 while revenues went up 9.7 percent to P21.5 billion despite difficult market conditions.

The bank’s total assets reached P504 billion, making it the country’s seventh largest universal bank.