S&P upgrades BPI credit rating

MANILA, Philippines — Ayala-led Bank of the Philippine Islands (BPI) bagged a credit rating upgrade from S&P Global Ratings on the back of its dominant market position, good competitive position and strong capitalization.

The country’s third largest private-owned bank in terms of assets was assigned a BBB+ long-term and an A2 short-term issuer credit ratings (ICR) on the back of a stable outlook.

This is the first credit rating assigned by S&P to the bank that is at par with the Philippine sovereign rating of BBB+ or a notch below the much coveted A rating.

“The ratings reflect BPI’s dominant market position as the third-largest bank in the Philippines, its good competitive position, and its strong capitalization. We expect the bank’s risk adjusted capital ratio to be 10 to 11 percent over the next two years, underpinned by high profit retention and moderation in loan growth,” the debt watcher said.

In addition, S&P anticipates that BPI’s asset quality will continue to be sound, underscoring the bank’s good underwriting practices and risk control.

However, it said a minor deterioration in asset quality is likely as the bank grows its higher-yielding, but riskier, consumer and small and midsize enterprise (SME) portfolio.

BPI’s stand-alone credit profile (SACP) was set at bbb+ as its funding profile is underpinned by its extensive branch network, well-established franchise and record of strong depositor confidence.

“The bank is the first private domestic bank in the Philippines to achieve investment-grade ratings of bbb+/BBB+ in both SACP and ICR,” it said.

Amongst the four bank-specific factors comprising the SACP, BPI achieved a strong, +1 notch rating for business position and capital and earnings, an adequate, neutral position for risk position, and an average and strong, neutral position for funding and liquidity.

“S&P’s view is that the bank will maintain its dominant market position and strong capital buffers over the next two years,” S&P said.

The bank’s earnings jumped by 24.6 percent to P13.74 billion in the first half from P11.03 billion in the same period last year.

BPI’s total assets grew by 12.3 percent to P2.13 trillion, with return on assets at 1.34 percent.

Total equity reached P259.88 billion, providing a strong capital position to deliver future growth, with an indicative common equity Tier 1 ratio of 15.55 percent and capital adequacy ratio of 16.44 percent.