MOODY’S INVESTORS Service has assigned counterparty risk ratings (CRR) to 10 Philippine banks, assessing the lenders’ capability to carry out their contractual obligations.
The global debt watcher said in a report late Tuesday that it has assigned CRRs to 10 local banks, namely Bank of the Philippine Islands (BPI), BDO Unibank, Inc. (BDO), China Banking Corp. (China Bank), Land Bank of the Philippines (LANDBANK), Metropolitan Bank & Trust Co. (Metrobank), Philippine National Bank (PNB), Rizal Commercial Banking Corp. (RCBC), Security Bank Corp., UnionBank of the Philippines and United Coconut Planters Bank (UCPB).
In the statement, Moody’s said CRRs assess the capability of the banks to honor their non-debt counterpart financial liabilities or CRR liabilities.
The ratings also reflect the “expected financial losses in the even such liabilities are not honored.”
“Examples of CRR liabilities include the uncollateralized portion of payables arising from derivatives transactions and the uncollateralized portion of liabilities under sale and repurchase agreements,” Moody’s said.
The credit rater added that CRRs are “not applicable to funding commitments or other obligations associated with covered bonds, letters of credit, guarantees, servicer and trustee obligations, and other similar obligations that arise from a bank performing its essential operating functions.”
Broken down, BPI, BDO and Metrobank, the country’s biggest banks, received local and foreign currency long-term CRRs of Baa1, two notches above the Baa3 minimum investment grade.
China Bank, LANDBANK, PNB, RCBC, Security Bank and UnionBank obtained a Baa2 local and foreign currency long-term CRRs, a notch above the minimum investment grade.
Meanwhile, all the above-mentioned banks except UnionBank got a local and foreign currency short-term CRRs of P-2.
UCPB, on the other hand, received long- and short-term CRRs of B1 and NP, respectively. Both ratings are below investment grade.
“The CRRs assigned to the 10 banks are in line with the Counterparty Risk Assessments (CRA) already assigned to the same banks,” Moody’s added.
Moody’s has assigned CRAs to the local lenders since 2015 and it remain unchanged since then.
The credit rater added that it could upgrade the ratings of the local banks if Moody’s bumped up the sovereign rating of the Philippines as well as the banks’ baseline credit assessments (BCA).
Factors that could lead to the lenders’ BCA upgrade include the consistent reduction in the non-performing loans, steady increase in profitability and diversification of funding sources to reduce high-cost corporate deposits among others.
Currently, the country’s sovereign rating is at Baa2 with a stable outlook.
Last month, debt watcher S&P Global Ratings upgraded its Banking Industry Country Risk Assessment score on the local banking industry to 6 from the previous 7 buoyed by the sector’s improved credit fundamentals. — Karl Angelo N. Vidal