Global debt watcher S&P Global Ratings on Tuesday assigned a ‘BBB+’ long-term and ‘A2’ short-term issuer credit ratings to the Bank of the Philippine Islands, the third-largest lender in the country. The outlook on the long-term rating is stable.
“This is the first credit rating assigned by S&P to the bank, of which the “BBB+” ICR is at par with the Philippine Sovereign Rating of “BBB+,” S&P said in a statement.
S&P upgraded the Philippine Sovereign Rating on April 30, 2019. S&P classifies the banking sector of the Philippines in group ‘5’ under its Banking Industry Country Risk Assessment (BICRA). The anchor, the starting point for assigning an issuer credit rating to banks operating only in the country, is ‘BBB-’.
“The ratings reflect BPI’s dominant market position as the third-largest bank in the Philippines, its good competitive position, and its strong capitalization. We expect the bank’s risk adjusted capital (RAC) ratio to be 10 percent-11 percent over the next two years, underpinned by high profit retention and moderation in loan growth,” it said.
“In addition, we anticipate that BPI’s asset quality will continue to be sound, underscoring the bank’s good underwriting practices and risk control. However, a minor deterioration in asset quality is likely as the bank grows its higher-yielding, but riskier, consumer and small and midsize enterprise (SME) portfolio,” it said.
It said BPI’s funding profile was underpinned by its extensive branch network, well-established franchise and record of strong depositor confidence.
The bank is the first private domestic bank in the Philippines to achieve investment-grade ratings of bbb+/BBB+ in both SACP and ICR.
Among the four Bank-Specific Factors comprising the SACP, BPI achieved a “strong, +1 notch” rating for Business Position and Capital and Earnings, an “adequate, neutral position” for Risk Position, and an “average and strong, neutral position” for Funding and Liquidity.
The ICR assigned by S&P is based on available information and projections at the time the rating review was performed and according to the S&P Global Bank Ratings Framework Methodology. S&P’s view is that the Bank will maintain its dominant market position and strong capital buffers over the next two years.