Moody’s affirms stable credit grade of Phl banks

International credit watcher, Moody’s Investors Service, affirmed its Baa2 long-term local and foreign currency bank deposit and senior unsecured ratings of Security Bank Corp. (SBC) and China Banking Corp. (China Bank) amidst moderate loan growth.

“The affirmation of (SBC) ratings reflects the Bank’s strong and above-average capital position that offsets its elevated asset risks, average profitability, modest funding structure... and adequate liquidity,” Moody’s explained.

It added the bank’s tangible common equity to adjusted risk-weighted assets ratio would remain above 17 percent in the next 12 to 18 months as its internal capital generation will keep pace with moderate loan growth.

While the lender’s share of deposits in low-cost current and savings accounts grew to 58 percent as of end-September 2021 from only 45 percent as of end-2019, it remains lower than the 77 percent industry average.

Nevertheless, Moody’s said that SBC’s deposit franchise remains modest, albeit improving in the previous years.

Factors that could lead to a downgrade include the deterioration in asset quality or its NPL exceeding eight percent, reduction in capital buffer, and decline in core profitability to below 0.5 percent.

Likewise, Moody’s recognized China Bank’s improved capital and profitability along with its stable funding and liquidity in keeping its current credit score.

On the other hand, the credit watchdog adjusted Rizal Commercial Banking Corp.’s (RCBC) credit score to Baa3 from Baa2.

“The downgrade is driven by weak asset quality and deterioration in the capital. The outlook, where applicable, has been revised to stable from negative as higher core profitability will mitigate risks to asset quality,” it said.

Factors that could lead to RCBC’s upgrade include better capital along with lower non-performing loans--below pre-Covid-19 levels.

The outlook, where applicable, has been revised to stable from negative as higher core profitability will mitigate risks to asset quality.

The downgrade is driven by weak asset quality and deterioration in the capital.