Fitch affirms ratings of 8 biggest lenders

International credit rater, Fitch Ratings has affirmed its grades and outlook on eight of the country’s largest banks amid the sustained expansion of the Philippine economy.

The debt watcher affirmed the long-term issuer default ratings (IDRs) of BDO Unibank, Metropolitan Bank & Trust Co. ( Metrobank), Bank of the Philippine Islands ( BPI), Philippine National Bank (PNB), Rizal Commercial Banking Corp. (RCBC), China Banking Corp. as well as government- run Land Bank of the Philippines and Development Bank of the Philippines (DBP).

Data from the Bangko Sentral ng Pilipinas (BSP) as of end-September 2016 ranked BDO of retail magnate Henry Sy as the largest bank in terms of assets, followed by Metrobank of taipan George Ty, Landbank, Ayala- led BPI, PNB of tobacco and airline magnate Lucio Tan, DBP, China Bank, also controlled by the Sy family and RCBC of tycoon Alfonso Yuchengco.

The ‘BBB-“rating - minimum investment grade – was retained for BDO, Metrobank, and BPI reflecting their strong domestic franchises, diverse revenue streams and adequate risk-management frameworks that would help to underpin their steady asset quality, above-average profitability and healthy balance sheet buffers.

BPI's ratings also give credit for its historically prudent risk appetite, and superior profitability and funding and liquidity metrics.

Fitch maintained the speculative ‘ BB+’ rating of PNB, China Bank and RCBC after showing a greater appetite for growth in recent years as they seek to gain scale and share,.

Fitch expects PNB, China Bank and RCBC that account moderate market shares of around three to six percent by loans, assets and deposits would display broadly stable asset quality and profitability backed by acceptable risk controls as they grow.

The rating agency said the profitability of the three largest banks is generally better than that of the midtier banks.

“We attribute this to their greater scale and more diverse business models - they have broader recurring noninterest income streams,” it said.

In contrast, Fitch cited trading gains have comprised a larger share of the revenues of PNB and RCBC on average over the past few years.

“This share has declined more recently relative to the highs in 2012, and we expect both banks to continue to emphasize recurring revenue generation in the medium term.”