Moody’s affirms BDO Unibank’s rating, outlook
MOODY’S Investors Service has affirmed its local and foreign currency deposit ratings for the Syled BDO Unibank, Inc. (BDO), also keeping its “stable” outlook.
In a statement, Moody’s said it affirmed BDO’s local and currency deposit ratings of “Baa2/ Prime-2” as well as the lender’s senior unsecured debt and senior unsecured medium- term note (MTN) program ratings of “Baa2” and “(P)Baa2,” and shortterm MTN program score of “(P) Prime-2.”
Along with this, the global debt watcher also affirmed the Sy-led bank’s baseline credit assessment ( BCA) of “baa2” and adjusted BCA of “baa2,” while BDO’s counterparty risk assessment was kept at “Baa1(cr)/P-2(cr).”
Moody’s also kept its outlook on BDO’s credit score steady at stable, mirroring the country’s rating of “Baa2” with a stable outlook.
“The affirmation of BDO’s Baa2 deposit and senior unsecured debt rating is based on the bank’s BCA of baa2, and Moody’s expectation that there is a very high probability of the bank receiving systemic support from the Philippine government (Baa2 stable) in times of need,” the global debt watcher stated.
On Tuesday, Moody’s kept the country’s “Baa2” long-term
issuer and senior unsecured debt ratings — a notch higher than minimum investment grade — and held its local currency and foreign currency senior unsecured ratings.
Its rating outlook for the Philippines – for up to two years – was also kept at stable, which signalled a balance between positive and negative developments that could affect the country’s economy.
According to Moody’s, the “baa2” BCA rating for BDO is on the back of the bank’s “domestically focused, prominent and growing franchise; stable asset quality and loss absorbing buffers; sufficient capital levels that exceed the regulatory minimum; stable profitability, supported by a gradual expansion in net interest margins; and robust funding and liquidity profile.”
The international credit rater also positioned BDO’s financial profile at “baa1,” a notch above the current BCA of “baa2.”
Moody’s said it expects the country’s largest lender in asset term’s common equity tier 1 ( CET1) ratio to surpass 12.5% by end-2018 after its CET1 ratio stood at 14% in the first quarter on the back of its P60 billion stock rights issue last January.
BDO was able to raise P60 billion as planned from the sale of its stocks last January after domestic and offshore investors swarmed the bank’s shares. The exercise was said to be the “largest equity capital markets transaction by a Philippine corporate entity to date.”
Proceeds from the offer will be used as a capital buffer in pursuant to the Bangko Sentral ng Pilipinas’ ( BSP) capital requirements required for Domestic Systematically Important Banks ( DSIB) and to improve the lender’s medium-term expansion plans.
The offer also brought the bank’s capital base to P282 billion, which in turn boosted its capital adequacy ratio at to 15.6% at end-March.
The global debt watcher also sees BDO’s asset quality profile to remain stable in the next 12-18 months on the back of “robust economic conditions” that will boost bank borrowers and asset quality in the local banking sector, as well as anchored by the lender’s “diverse loan portfolio” and “low leverage in the economy.”
Moody’s also noted that BDO’s profitability profile will be broadly stable on the back of its return on asset booked at around 1.1% 1.2%. “The bank benefits from a strong funding and liquidity position. As the largest bank in the country, with a market share of 22% and 18% of total system loans and deposits at end-March 2017, BDO’s market position will likely remain defensible,” the credit rater said.
BDO bank saw its net income reach P5.8 billion in the first quarter, a 6% growth from the P5.5 billion booked in the same period in 2016, on the back of a double-digit expansion in its total loans during the period.
Its net interest income booked a double- digit growth of 19% to P18.4 billion in the January to March period from the P15.5 billion in 2016.
The bank’s customer loans rose to P1.5 trillion or 21% higher year-on-year while total deposits expanded by 13% to P1.9 trillion from the P1.7 trillion recorded in the same period last year after its low-cost current account, savings account deposits grew 17% in the first quarter.
Shares in BDO lost 20 centavos or 0.16% to end at P122.10 apiece on Wednesday.