Moody's expects improved credit ratings for BPI, Metrobank

By Donnabelle L. Gatdula, The Philippine Star

Posted at Mar 15 2014 09:01 AM | Updated as of Mar 15 2014 05:01 PM

MANILA, Philippines - The credit metrics of two of the country’s biggest banks – Metropolitan Bank & Trust Co. (Metrobank) and the Bank of Philippine Islands (BPI) – are expected to continue to improve in the next 12 to 18 months, international rating agency Moody’s Investors Service said.

Moody’s, which affirmed the Baa3/ Prime-3 deposit ratings of both Metrobank and BPI, said the ratings outlook remains positive.

The Baa3/ Prime 3 rating falls under an investment grade, which means the financial institution has the ability to repay short-term debt with moderate credit risk.

Moody’s has also revised the outlook of the D+ standalone bank financial strength ratings (BFSRs) of the two banks – equivalent to a baseline credit assessment (BCA) of baa3 – to positive from stable.

According to Moody’s, it views the two banks’ financial profiles to be strong for their baa3 BCA.

“The banks’ BCA also takes into account the banks’ consistently robust capital and liquidity profiles, which reflect discipline and prudence in business growth,” it said.

Taking into account the banks’ recent efforts to strengthen their capital base in preparation for future business growth, Moody’s said it expects the two banks to maintain capital levels well above the minimum capital requirements under Basel III.

Moreso, the credit rating agency expects an improvement in the operating environment of the Philippine banking system, owing to robust growth of the Philippine economy and stabilizing external conditions.

Moody’s said the credit profiles of BPI and Metrobank are 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.

The baa3 BCAs of the two banks remain in line with the sovereign rating of the Philippine government (Baa3 positive), taking into account the close correlation between the creditworthiness of the banks and that of the government.

Given the positive outlook, Moody’s said an upgrade of the sovereign rating would likely lead to an upgrade of the banks’ ratings, assuming their credit metrics remain robust.