ROBINSONS BANK Corp. has been conferred the second-highest credit rating by local debt watcher Philippine Rating Services Corp. (PhilRatings) for its planned corporate bond offering of up to P5 billion.

In a statement over the weekend, PhilRatings said Robinsons Bank was assigned the “PRS Aa minus (Corp.)” credit rating for its P2.5-billion fixed-rate bonds with an oversubscription of P2.5 billion.

A PRS Aa rating means the company has a “strong capacity to meet its financial commitments relative to that of other Philippine corporates.” The rating on Robinsons Bank was also given a stable outlook, meaning it is expected to stay for the next 12 months.

Robinsons Bank is the banking and financial services unit of the Gokongweis’ JG Summit Holdings, Inc. It is planning to issue two-year fixed-rate bonds next month at the Philippine Dealing & Exchange Corp.

PhilRatings said the credit rating it assigned to Robinsons Bank is based on the company’s strong shareholder support, skillful management, above-satisfactory funding profile, growing franchise and modest profitability.

It said since the two shareholders of Robinsons Bank are part of the JG Summit Group — JG Summit Capital Services Corp. (60%) and Robinsons Retail Holdings, Inc. (40%) — the bank has a captured market from the group’s business interests in food, agro-industrial and commodities, real estate and hotel, air transportation and petrochemicals.

The company’s funding profile, where its deposits are mostly from current and savings accounts (CASA) at 76.1% as of June 30, is also commended by PhilRatings. It said the forecast is that Robinsons Bank will see a CASA-to-total deposits ratio “within historical levels” as the low-cost funds continue to grow due to the bank’s expansion.

“Similar to its peers, Robinsons Bank has started to tap institutional funds, through Long-Term Negotiable Certificate of Deposits (LTNCD) and bond issuances. These debt instruments’ lower reserve requirements (relative to deposits) translate to lower funding costs thus, making them a viable funding alternative for domestic banks,” it added.

The debt watcher also took note of the 22-year-old company’s ability to sustain growth despite challenging competition from the country’s bigger banks. “Robinsons Bank is considered to have a marginal share of the commercial/universal bank sector’s assets, capital, deposits and loans… (H)owever, (it) appears able to compete against its much bigger peers, given the gradual and consistent improvement in the bank’s industry ranking,” it said.

The company’s net income dipped 7.8% in the first semester to P186.1 million, but its loan portfolio grew 15.4% to P68.9 billion and total deposits to P88.3 billion.

“While return on average assets (ROAA) has been stable, it remained below 1%, ranging from 0.3% to 0.4%… Going forward, forecast ROAA will show improvement from historical levels, but will remain modest,” the debt watcher said. ROAA is a measure of a company’s ability to generate profit.

Lastly, PhilRatings said the generally positive macroeconomic environment in the Philippines will come in favor of the banking sector.

“The country’s continued strong economic growth will support domestic credit, with forecasts of a 14-15% expansion in corporate and household loan demand in 2019. The government’s push for aggressive infrastructure spending will also support credit growth via its multiplier effect…,” it said. — Denise A. Valdez