MANILA, Philippines - Small Business Corp., a government financial institution engaged in small enterprise development financing, was given an issuer rating of PRS Aa minus by the Philippine Rating Services Corp.
A company rated PRS Aa minus 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.
An issuer rating is an opinion on the general and overall creditworthiness of the issuer, evaluating an entity’s ability to meet all financial obligations falling due within a time horizon of one year.
SB Corp. is tasked with the primary responsibility of implementing policies and programs to assist micro, small and medium enterprises,
In issuing the rating, PhilRatings took into account the government’s supportive regulatory framework for growth and development of the micro SME sector, as well as SB Corp.’s sustained positive performance in terms of profitability.
The rating also took into consideration uncertainties on the sustainability of an improvement in SB Corp.’s asset quality, with weaker asset quality measures seen for the interim September 2011, in contrast with the noticeable improvement in the same measures at end-2010.
The Bangko Sentral ng Pilipinas has instituted regulatory incentives for banks to lend to SMEs, such as reducing the risk-weight for well-diversified SME loans from 100 percent to 75 percent, exempting micro and small enterprises from documentary requirements such as income tax returns, and lowering the reserve requirements (and therefore funding costs) for thrift and rural banks which cater to the MSME sector.
SB Corp. sustained its positive profit performance, boosted by the robust performance of its financing programs. On the other hand, projections for 2012 show moderate revenue growth, because of the slower rate of increase in net interest income and a decline in investment income.
According to PhilRatings, SB Corp.’s asset quality likewise showed notable improvement in 2010, with its past due rate and non-performing assets (NPA) ratio decreasing from year-ago levels.
PhilRatings also noted that SB Corp.’s reserve coverage has been consistently increasing from 2008 to 2010. Unaudited results as at end-2011, however, showed some deterioration in asset quality measures due to a combination of higher past due loans and relatively flat portfolio growth.