Gov’t banks get ratings upgrade from Fitch

State-run Land Bank of the Philippines and Development Bank of the Philippines (DBP) bagged credit rating upgrades from Fitch Ratings amid the clearer expanded and future roles under the Duterte administration.

Fitch upgraded the long-term issuer default ratings (IDRs) of both Landbank and DBP to ‘BBB’ or a notch above the minimum investment grade of ‘BBB-’ on the back of stable outlook.

The debt watcher said the upgrade was driven by the upward revision of their support rating floors due to the government’s propensity to support the banks.

“The banks’ roles appear to have been expanded and future roles made clearer after pronouncements by the administration of President Duterte, even though there have been no changes in their state ownership, systemic importance or broader mandates,” it said.

Landbank was directed in late 2016 by the current administration to absorb smaller, state-owned Philippine Postal Savings Bank (Postbank) and convert it into Overseas Filipino Bank, which was officially launched this mont.

On the other hand, the Duterte administration has also proposed to make DBP the country’s infrastructure bank in line with the administration’s policy agenda to improve the nation’s infrastructure base and better catering to the needs of overseas Filipinos.

Both banks have also been allocated specific roles within the 2018 national budget.

“This raises our expectations for the state to provide support to the banks in times of need to enable them to carry out their objectives in support of government policy,” Fitch said.

Around 93 percent of Landbank’s loans have been extended to mandated or priority sectors, while 88 percent of DBP’s loans are policy-related.

Both banks have access to official development assistance funds – with government-guaranteed funds from multilateral and bilateral organizations – though recent usage of such funds has been low.

The banks are primarily depositfunded – around 73 percent of Landbank’s deposits are from the public sector, versus 74 percent for DBP.

The rating agency added both banks have received modest capital infusions from the state to support growth over the past two years, and DBP has been allocated a further P2 billion in fresh capital in the 2018 budget. –