Moody's affirms BPI, BDO ratings

Moody’s Ratings affirmed the investment-grade deposit ratings and stable outlooks of BDO Unibank Inc. and Bank of the Philippine Islands on May 22, keeping two of the Philippines’ biggest lenders in the Baa2 category. The agency said the actions covered the banks’ long- and short-term foreign- and local-currency deposit ratings at Baa2/P-2, along with related counterparty risk ratings, assessments and medium-term note program ratings. Moody’s said both banks continue to show strong funding and liquidity profiles, even as credit costs could rise if pressure on retail borrowers worsens. Philippine media reports on Friday said the actions came as investors watched emerging-market credit more closely during a week of broader fiscal concern. ### Which ratings did Moody’s actually affirm for BDO and BPI? Baa2/P-2 was the rating level Moody’s reaffirmed for both banks’ long- and short-term foreign- and local-currency deposit ratings, according to reports citing the agency’s statements. The actions also covered counterparty risk ratings and assessments, baseline credit assessments and the lenders’ medium-term note programs. (business.inquirer.net) May 21 was the date Moody’s issued the underlying rating actions, according to the Moody’s Philippines financial-institutions listings, which show a BPI affirmation dated May 20 and related Philippine bank rating actions posted in April and May. Moody’s public listings do not surface the full text of every action without navigating issuer pages, but multiple Philippine business outlets reported the BDO and BPI affirmations from the agency’s statements released late on Wednesday. (bworldonline.com) ### Why did Moody’s keep the outlook at stable? Moody’s cited strong profitability, solid asset quality and ample liquidity buffers in affirming the two banks, according to Manila Bulletin and BusinessWorld reports based on the agency’s statements. For BDO, the agency pointed to good asset quality, strong funding and liquidity, good profitability and adequate capital. For BPI, it cited strong profitability, strong funding and liquidity and adequate capital. (moodys.com) The banks’ deposit-heavy funding bases were a central factor in the stable outlooks. BusinessWorld reported that Moody’s said both lenders benefit from strong deposit franchises, while The Manila Times said the agency cited ample liquidity and resilient profitability despite rising risks tied to expanding retail loan books and elevated credit costs. (mb.com.ph) ### What risks did Moody’s flag despite the affirmation? Moody’s warned that both banks could face higher credit costs as they build buffers against possible deterioration in loan quality linked to the Middle East crisis and its effect on some retail borrowers, the Philippine Daily Inquirer reported. That same report said Moody’s flagged risks to BDO’s asset quality from its concentration in large corporate loans and long-dated investment securities. (bworldonline.com) Retail lending was the area highlighted most often in local coverage. The Manila Times said Moody’s saw rising risks from expanding retail loan portfolios and elevated credit costs, even as the agency maintained that the banks’ current balance-sheet strength supports the existing ratings. ### Why weren’t the banks upgraded? The Philippines’ sovereign rating was cited as the main ceiling on any upgrade. (business.inquirer.net) BusinessMirror reported that Moody’s said an upgrade was unlikely because BDO’s and BPI’s deposit ratings and baseline credit assessments are already at the same level as the Philippine sovereign’s Baa2 rating. That means the rating action was an affirmation rather than an improvement in grade. (manilatimes.net) The decision preserved investment-grade status and a stable outlook, but it did not move either bank above the sovereign-linked constraint described in local reporting. ### Where does this leave investors and the banks next? May 22 coverage in the Inquirer, BusinessWorld and other Philippine outlets framed the affirmations as a sign that Moody’s still sees BDO and BPI as supported by strong domestic franchises and manageable near-term risks. (businessmirror.com.ph) Moody’s Philippines financial-institutions pages continue to list rating actions and follow-up credit opinions for banks in the market, including other Philippine lenders reviewed in April and May. (bworldonline.com) Moody’s next published steps are likely to appear through issuer-specific rating actions or credit opinions on its Philippines banking pages, where recent entries include April and May updates for Security Bank, Philippine National Bank, Union Bank of the Philippines and China Banking Corp. (moodys.com) (business.inquirer.net)