4 local banks may also get upgrades

MANILA, Philippines - After putting the country’s credit rating under review, Moody’s Investors Service also announced late Thursday that four local banks may also get an upgrade.

In a statement, the New York-based debt watcher said local and foreign currency deposit ratings of BDO Unibank Inc., Bank of the Philippine Islands (BPI), Metropolitan Bank & Trust Co. (Metrobank) and Land Bank of the Philippines may be raised soon.

The lenders are rated Ba1, the highest junk grade, under Moody’s metrics, similar to that of the government, which earlier on Thursday was put also under evaluation for “possible upgrade” to investment-grade status.

“The credit strength of the government is an important input in our assessment of the government’s capacity to provide support in times of stress,” Moody’s pointed out.

“An upgrade of the sovereign rating would likely lead to an upgrade of the bank ratings placed under review…, assuming all other bank fundamental credit characteristics remain robust,” it added.

Similarly, the credit rater also said it may raise BDO’s foreign currency unsecured debt rating of Ba1 and Metrobank’s Ba2 grade for local currency subordinated debt. The four banks’ financial strength ratings were kept.

According to Moody’s rating brochure, deposit ratings pertain to the ability of banks to “repay punctually” its deposit obligations to creditors. Debt ratings refer to ability to pay debts, while financial strength ratings gauge banks’ over-all “safety and soundness.”

Simon Chen, lead analyst at Moody’s for Philippine banks, was quoted as saying that it is likely that the four banks could get “additional notch of systemic support” from the government once the review of Philippines’ credit rating results in an upgrade.

The review of the banks, Moody’s said, will also take into consideration their “systemic importance” to over-all financial system, which would naturally be a factor on the state’s willingness to extend assistance.

According to Moody’s, the banks’ importance will be gauged through their market share of deposits and loans, their participation in the payments’ system and “government’s ownership in banks.”

Of the four lenders under scrutiny, only Landbank is government-run, while BDO, Metrobank and BPI— the country’s three biggest banks in asset terms in that order — are privately run by the largest local conglomerates.

Moody’s said it expects to finish the review of bank ratings in three months, “upon the conclusion of the review of the Philippine sovereign debt rating.”