MANILA, Philippines — Global debt watcher Fitch Ratings on Thursday upgraded its outlook on two state-owned banks following a similar move it did for the Philippine government.
Fitch raised its outlook on Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP) to “positive” from “stable” and maintained their long-term issuer default ratings (IDR) at “BBB”.
Earlier this month, Fitch revised its outlook on the Philippine government from “stable” to “positive” and affirmed the country’s credit rating at “BBB” — still a notch above minimum investment grade.
Credit ratings reflect the ability of a country to manage and pay back its debt. A higher rating can lower the cost of borrowing in foreign currencies for the Philippine government.
Outlooks indicate the direction a rating is likely to move over a one- to two-year period. A positive outlook means that an economy’s rating could stay at its present level or potentially be upgraded.
“The Outlook revision on both banks' IDRs mirrors the Outlook on the Philippine sovereign, and reflects Fitch's view of improving sovereign ability to provide extraordinary support to the two government banks, if needed,” Fitch said in a statement.
“The assessment takes into consideration the banks' unique policy roles, 100% state ownership and systemic importance,” it added.
Data from the Bangko Sentral ng Pilipinas as of end-September last year show the LBP is the third biggest bank in the country in terms of total assets while DBP ranked eighth.
In the same statement, Fitch said the ratings of privately-owned Philippine commercial banks are not affected by its review.
“We will reassess their ratings if there is further evidence of the sovereign's improved ability and propensity to support the banking system more broadly,” the credit rating agency said. — Ian Nicolas Cigaral