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Fitch affirms ratings of PHL’s BPI, BDO, Metrobank

Posted on April 24, 2015

By Joann Santiago

MANILA, April 24 (PNA) — Fitch Ratings on Friday affirmed its ratings on Philippines-based banks Bank of the Philippine Islands (BPI), Banco de Oro Unibank Inc. (BDO) and Metropolitan Bank & Trust Company (Metrobank).

To date, the debt watcher gives the Ayala-led BPI and Ty-led Metrobank ‘BBB-‘ long-term issuer default ratings (IDR) with stable outlooks and viability ratings (VR) of ‘bbb-‘.

Also, BDO’s IDR is ‘BB+’ with positive outlook while its VR is ‘bb+’.

In a statement, the debt watcher said the decision to affirm these banks’ ratings was based on their respective VRs, IDRs and national ratings.

For one, it explained that ratings of BPI indicates not only the financial institution’s solid credit profile and stable funding base but also its “greater appetite for growth in recent years.”

In 2014, lower trading gains negatively affected BPI’s net income, which fell by four percent to Php18 billion from year-ago’s Php18.8 billion.

For Metrobank, Fitch said its ratings are buoyed by its “liquid balance sheet, improved asset quality and good loss-absorption buffers.”

The debt watcher said Metrobank’s capital base was further supported by the bank’s equity raising activity last April when it attracted additional Php32 billion capital “which will likely help fund the above-trend loan growth in the coming 12-18 months.”

Metrobank ended 2014 with a consolidated net income of Php20.1 billion, 10.56 percent lower than the previous year’s Php22.49 billion due to the drop in other operating income and share in net income of associates among others.

Fitch, however, noted that the outlook on these banks’ ratings “reflect Fitch’s expectation that their risk profiles will be maintained over the near to medium term amid robust economic growth in the Philippines.”

Relatively, Fitch said its ratings on BDO showed the bank’s “moderate but improving core profitability and asset quality, stemming from its historically higher appetite for growth and acquisition relative to peers.”

“The ratings also take into account its sound funding position and reasonably healthy capitalisation and reserves,” Fitch said citing that the outlook on BDO’s ratings “acknowledges the improvement in its underlying profitability and asset quality over the past few years.”

On Friday, the bank reported a 12 percent year-on-year growth of its first quarter net income to Php6.1 billion.

Relatively, it ended 2014 with an 18 percent year-on-year rise in net income to Php22.8 billion.

The debt watcher noted that bank lending in the Philippines remains strong and continues to get the necessary support from favourable operational conditions and a very liquid environment.

It warned that this development “raises the risk of credit misallocation and asset bubbles” but pointed out that “anecdotal property price inflation — as one indicator — does not appear extreme.”

Factors that counter a possible asset price bubble include the banking industry’s healthy financial profile, with loss absorption buffers remaining strong.

Fitch said its internal stress tests “suggest that the three large banks have adequate loss absorption cushions to weather a fairly significant rise in credit costs,” thus, it “expects the banks to maintain relatively high core capitalisation in the medium term.”

This, as the Bangko Sentral ng Pilipinas (BSP) now requires domestic systemically-important banks (D-SIBs) to further strengthen its capital starting in 2017.

“In addition, on-going initiatives by the regulator to monitor potential asset quality issues and strengthen the banks’ prudential practices are appropriate in Fitch’s view,” the debt watcher added. (PNA)

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