FITCH RATINGS raised its scores for government-owned Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP) to investment grade following its move to upgrade the sovereign’s rating earlier this week.
The long-term issuer default ratings (IDRs) of Landbank and DBP were upgraded by a notch to “BBB-,” the minimum investment grade from the previous “BB+”, with a “stable” outlook.
In a statement on Thursday, Fitch said the IDR upgrades of Landbank and DBP were driven by expectations of “an improving sovereign fiscal profile,” which led to the upgrade of the banks’ support rating floors (SRFs) as well.
Last Monday, the global debt watcher raised the Philippines’ IDR to “BBB” with a “stable” outlook. This is a notch above the minimum investment grade and is aligned with the ratings earlier given by Moody’s Investors Service and S&P Global Ratings.
“The ratings on DBP and [Landbank] also reflect our expectation that the sovereign’s propensity to provide extraordinary support to both banks remains high in times of need,” the statement read, with the debt watcher citing unique policy mandates, full government ownership as well as systemic importance as the key drivers.
Concurrently, Fitch also raised the SRFs of BDO Unibank, Inc., Metropolitan Bank & Trust Co. (Metrobank), Bank of the Philippine Islands (BPI), Philippine National Bank (PNB), China Banking Corp. (China Bank) and Rizal Commercial Banking Corp. (RCBC).
Fitch upgraded the SRFs of Landbank, DBP, BDO, Metrobank and BPI to investment-grade “BBB-” from “BB+,” while those on China Bank, PNB and RCBC were raised to “BB,” two notches below investment grade, from “BB-.”
The debt watcher’s rating actions on the private banks also stemmed from the country’s improving capacity to provide support in times of need.
“We believe BPI, BDO and Metrobank are of strong significance to the banking system and economy, given their market shares of around 12%-18% by assets.”
“We also see the mid-tier banks — [China Bank], PNB and RCBC — as systematically important, albeit less so than their larger peers,” Fitch added. — KANV