Major Philippines banks get rating upgrade

MANILA, Philippines — Fitch Ratings has raised the credit ratings of the country’s largest banks as well as government financial institutions after the Philippines received a credit rating upgrade on the back of the improving economy.

The debt watcher upgraded the rating of state-run Development Bank of the Philippines (DBP) and Land Bank of the Philippines to ‘BBB-’ or minimum investment grade from a junk status of ‘BB+’ with stable outlook.

“The ratings on DBP and Landbank also reflect our expectation that the sovereign’s propensity to provide extraordinary support to both banks remains high in times of need, owing to their unique policy mandates, full government ownership and systemic importance,” Fitch said.

DBP and Land Bank each hold roughly four percent and 10 percent of banking system assets, respectively.

Likewise, Fitch upgraded the ratings of major banks led by BDO Unibank Inc., Metropolitan Bank & Trust Co., Bank of the Philippine Islands (BPI), Philippine National Bank, China Banking Corp. and Rizal Commercial Banking Corp.

The debt watcher said the rating actions on the privately owned banks similarly reflect the improving sovereign capacity to provide extraordinary support, as well as Fitch’s belief that the sovereign’s propensity to provide such support to the banks remains intact.

 “We believe BPI, BDO and Metrobank are of strong significance to the banking system and economy, given their market shares of around 12 to 18 percent by assets.

The ratings of DBP, Landbank, BPI, BDO and Metrobank were raised to ‘BBB-‘ from ‘BB+’ while the ratings of China Bank, PNB and RCBC were also raised to ‘BB’ from ‘BB-.’

“We also see the mid-tier banks – China Bank, PNB and RCBC, each with roughly three to six percent of system assets – as systemically important, albeit less so than their larger peers,” Fitch said.

Last week, Fitch upgraded the credit rating of the Philippines to ‘BBB’ or a notch above the minimum investment grade of ‘BBB-‘ amid the country’s sustained economy expansion as well as the tax reform plan and bold infrastructure program under the Duterte administration.

The upgrade, the first since President Duterte assumed office last year, put the agency’s rating at par with that of S&P Global Ratings and Moody’s Investors Service.

Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said the upgrade is a recognition of the positive transformation that is taking place in the Philippines.