Fitch Ratings upgraded the viability ratings of Philippine banks, citing improved financial metrics driven by the country’s robust economic environment over the past three years.
The ratings agency forecasts the Philippine economy to maintain its momentum, with GDP growth of around 6 percent in the medium term, which should continue to support banking business volume and limit impairment risks.
BDO Unibank Inc (BBB-/Stable), Bank of the Philippine Islands (BBB-/Stable) and Metropolitan Bank & Trust Company (BBB-/Stable) were among the biggest beneficiaries of the resilient economy and higher interest rates.
Fitch said their risk-adjusted profitability had exceeded pre-pandemic levels and was projected to remain higher over the next 12 to 18 months.
The agency expects the banks’ established franchises and steady underwriting standards to help maintain loan quality as they expand their retail customer base. These factors should also support their viability ratings, which drive their long-term issuer default ratings (IDRs).
The standalone credit profiles of Land Bank of the Philippines (BBB/Stable) and Development Bank of the Philippines (BBB/Stable) have also improved, with capital buffers gradually rebuilding, it said.
Asset quality issues related to past policy lending continue to weigh on their financial performance, but Fitch expects these pressures to subside over the next 12 months due to a resilient economy and lower interest rates.
Fitch forecasts impairment charges to taper off, supporting further improvements in profitability and capital accrual.
The state-owned banks’ long-term IDRs are driven by the agency’s expectation of state support, as indicated in their government support ratings of “bbb”, rather than their standalone credit ratings, it said.