Asiatrust’s Tier-2 issue gets PRS A- rating

Asiatrust Development Bank’s proposed P550-million tier-2 issue obtained a rating of PRS A minus from the Philippine Ratings Services Corp.

A rating of PRS A means the issue has "...favorable investment attributes and are considered as upper-medium grade obligations, with many factors considered adequate to give security to principal and interest payment even though it could become susceptible to future impairment."

Asiatrust’s planned debt issue has a maximum term of 10 years, with a call provision after five years.

PhilRatings considered the bank’s sound funding base, its acceptable capitalization level, its clear and coherent strategy in serving the SME market, as well as gains realized in terms of improving its asset quality.

PhilRatings noted that core earnings of the bank have been modest historically and that its market may become increasingly more competitive going forward. "Still, the bank has put in place specific steps to ensure its continued growth.

It has more than doubled its marketing organization and has adopted customized strategies for each target SME market (e.g. offering of full-cycle real estate financing, specialized loans to hospitals with HMO collection services, community banking)," Philratings said.

Asiatrust, one of the larger institutions in the thrift banking sector, has total resources of P13.2 billion and capital of P1.7 billion as of end-June this year. It accounts for 4.2 percent of the sector’s aggregate resources, 3.6 percent of total loans, 4.2 percent of deposits, and 4.6 percent of capital.

At present, the bank has 28 branches, with only five branches located outside the National Capital Region. These are in Bulacan, Rizal, Laguna, Cavite, and Isabela. These areas have been identified by the bank as locations with a high concentration of SMEs.

Asiatrust’s asset quality has improved considerably. Its non-performing asset (NPA) to gross loans ratio was at 22.6 percent as of June 2005. It managed a wholesale disposal of its bad loans in 2004 and 2005.

Although asset quality is at par with the sector, the bank’s loss provisioning provides a 41.6-percent coverage of NPAs, higher than the sector average of 35 percent as of March 2005.

In the next five years, Asiatrust aims to grow its loan portfolio aggressively by about 15 to 20 percent per year in the short to medium-term. It also intends to reduce the amount of repossessed assets on its balance sheet.

Asiatrust projects to aggressively dispose of its repossessed assets by about 20 to 30 percent of the total amount per year via public auctions and direct sales through market saturation. It has doubled its number of marketing and sales officers in its ROPOA group to achieve these targets.

Asiatrust has shown strength in its deposit-taking activities, with deposits accounting for 87 percent of total funding in the last three years and with annual growth of 17 percent in the last five years. About 65 percent of total deposits amounting to P10.15 billion as of June 2005, consisted of low-cost savings deposits. – Zinnia dela Peña