RCBC, PNB get Moody’s upgrade

Moody’s Investors Service has upgraded the credit ratings of Rizal Commercial Banking Corp. (RCBC) and Philippine National Bank (PNB) to a notch above minimum investment grade rating.

The debt watcher raised the credit rating of both the listed banks to Baa2 – a notch above minimum investment grade – from the minimum investment grade rating of Baa3.

The upgrade of RCBC reflects Moody’s assessment that the bank’s standalone profile has become comparable with its peers in the Philippines, as reflected by its solvency and funding metrics.

In addition, Moody’s expects the bank to maintain its capital buffers in line with the other similarly rated peers in the Philippines, by periodically accessing the equity markets, as it has done in the past.

The rating incorporates the modest deterioration in its asset quality metrics as reflected by its net nonperforming loan ratio of 1.4 percent as of end-September as compared to 0.97 percent in the year before.

“Over the next 12-18 months, its new NPL formation rate is likely to rise gradually as loans begin to season, but will remain manageable, given the robust operating environment in the Philippines,” Moody’s said.

RCBC rating also reflects the bank’s smaller branch network that limits its ability to garner low-cost deposits compared with that of its larger peers in the country. Nevertheless, liquid assets representing 32 percent of the bank’s tangible assets at end2016 provide support against downside risks.

Likewise, PNB’s rating was upgraded to Baa2 from Baa3 to reflect Moody’s assumption that the banks would receive support from the government of the Philippines in times of need.

The upgrade also reflects the bank’s improved financial profile since its merger with Allied Banking Corp. in 2013. In particular, the bank’s asset quality and capital buffers have become comparable with those of its peers in the Philippines.

“The bank’s high levels of capitalization and loan-loss coverage provide sufficient loss-absorption capacity at its current rating level to withstand moderate asset quality deterioration over the next 12-18 months,” Moody’s said.