Moody’s affirms BPI, Metrobank’s ratings

INTERNATIONAL credit watcher Moody’s Investor Service over the weekend affirmed the ratings of Bank of the Philippine Islands (BPI) and Metropolitan Bank & Trust Co. (MBT), with both outlooks remaining on stable.

Moody’s said both banks remain at a Baa2 long-term deposit rating, with a stable outlook which means that the banks’ credit profiles will remain robust over the next 12 months to 18 months.

“The rating affirmations of both BPI and MBT reflect the banks’ strong capitalization, which provides adequate buffer against financial shocks; strong funding and liquidity, supported by leading domestic franchises,” Moody’s said in its report.

The ratings agency also expressed expectations that the banks’ asset quality and profitability will improve over the next 12 months to 18 months.

Moody’s said both banks’ nonperforming loan (NPL) ratios will likely decline to around 2 percent by the end of 2023, in tandem with a rebound in economic activity in the Philippines.

“Significant loan concentration to the domestic corporates remains a key risk factor for both banks,” Moody’s said.

For return on assets of both banks, the ratings agency forecasts improvement to around 1.2 percent over the next 12 months to 18 months, as net interest margins widen with rising interest rates and provision expenses decline with the improving asset quality.

However, the capital ratio for both banks is seen to decline as loan growth recovers. Moody’s said this will remain at a “still-strong” level of around 15 percent over the next 12 months to 18 months.

“Their funding structures will remain strong due to their strong deposit franchises. Both banks are largely funded by low-cost sticky customer deposits. Liquidity will remain adequate,” Moody’s said.

The credit watcher said the likelihood of support from the Philippine government (Baa2 stable) will remain very high for both BPI and MBT, given their systemic importance, as reflected by their system market shares by total assets of 10.9 percent and 11.3 percent, respectively, as of December 31, 2021.

“The BCA [baseline credit assessment] and long-term deposit ratings of both BPI and MBT are already at the same level as the sovereign rating,” Moody’s said. “Given the stable sovereign outlook, an upgrade of the banks’ BCA and ratings is unlikely. Both banks’ BCA and long-term ratings could be downgraded if the sovereign rating is downgraded.”