Bank of Commerce retains high rating for P300-million debt issue

MANILA, Philippines - Bank of Commerce has retained its PRS Aa minus rating from the Philippine Rating Services Corp. for its outstanding P300 million unsecured subordinated debt.

Obligations rated PRS Aa are of high quality and are subject to very low credit risk. This means that the issuer’s capacity to meet its financial commitment on the obligation is very strong.

According to PhilRatings, an institution rated PRS Aa differs from the highest rated corporates only to a small degree, and has a strong capacity to meet its financial commitments relative to that of other Philippine corporates.

The rating assigned take into account the bank’s strengthened capital structure and its synergies with the San Miguel Corp. Group.

PhilRatings also considered the bank’s lower loan portfolio, existing asset quality challenges and tempered deposit take-up.

“The entry of the SMC Group has strengthened Bancommerce’s competitive position, giving the bank the opportunity to tap and service SMC’s ecosystem including its suppliers, dealers, subsidiaries and affiliates,” PhilRatings said.

SMC and its subsidiaries have been referring its dealers and suppliers to the bank for their deposits and financing requirements.

The strength, flexibility and diversity of the SMC Group’s businesses and financial performance provide a good base for Bancommerce’s continuing operation and financial growth.

The strong financial support of the bank’s shareholders allowed the bank to register a capital-to-risk assets ratio (CAR) of 16.8 percent as of end-2010 and 17.82 percent as of end-March 2011.

PhilRatings, however, noted the continuing reduction in the bank’s loans and receivables portfolio, as well as the continuing challenges faced by the bank in terms of asset quality. From P41.87 billion as of 2009, loans and receivables went down to P35.87 billion as of end-2010 and even slid further as of the end of the first quarter of 2011.

Bancommerce said the drop in loan portfolio was a result of a deliberate clean-up of accounts which management identified as corresponding to higher risk.

The decline in loan portfolio, coupled with the increase in non-performing loans (NPL) and non-performing assets (NPA), resulted in a higher NPL to gross loans and NPA ratios.

Going forward, the bank will focus on widening its distribution network further, with 10 new branches expected to be opened and 200 ATMs to be installed in 2011.