Fitch upgrades outlook for LANDBANK, DBP

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Land Bank of the Philippines (LANDBANK)

FITCH RATINGS has upgraded the outlook for its ratings on two government-owned lenders following a similar move for the country’s grade last week.

In a statement on Thursday, the debt watcher said it hiked its ratings outlook for Land Bank of the Philippines (LANDBANK) and the Development Bank of the Philippines (DBP), to “positive” from “stable” while maintaining their long-term issuer default ratings (IDR) at “BBB.”

“The outlook revision on the sovereign rating reflects continued adherence to a sound macroeconomic policy framework, progress on fiscal reforms that should keep government debt within manageable levels and continued resilience in its external finances,” Fitch said.

Fitch said the outlook revision for the banks is at par with its upgrade of the outlook for the Philippines’ sovereign rating last Feb. 11. The country’s rating was likewise maintained at “BBB,” which is a notch above the minimum investment grade.

A positive outlook means that the rating could stay at its present level or be upgraded over the next two years.

It added that the ratings of privately owned commercial banks in the country will not be affected by this review of state-owned lenders.

“We will reassess their ratings if there is further evidence of the sovereign’s improved ability and propensity to support the banking system more broadly,” Fitch said.

Fitch said the outlook upgrade for LANDBANK and DBP’s credit ratings shows the “improving sovereign ability to provide extraordinary support to the state-owned banks, if needed.”

“The assessment takes into consideration the banks’ unique policy roles, 100% state ownership and systemic importance,” it said.

“LANDBANK is also the largest recipient of government deposits. The ratings also consider the state’s ability to support the banking system, reflected in the ‘BBB’ sovereign rating,” Fitch added.

LANDBANK’s income jumped by 20% to P18.51 billion in 2019 from P15.48 billion in the previous year, breaching its full-year profit target of P16.64 billion. Meanwhile, its asset base grew to a record-high P2.03 trillion, up eight percent from 2018.

On the other hand, DBP’s net earnings slipped by 1.56% to P4.42 billion in the first nine months of 2019 from the P4.49 billion logged in the previous year. As of end-September 2019, DBP’s assets stood at P700.9 billion. — L.W.T. Noble