Fitch Ratings has revised the outlook on state-run lenders Land Bank of the Philippines and Development Bank of the Philippines (DBP) to negative from stable, signaling a potential downgrade following a similar move on the Philippine sovereign.
The debt watcher affirmed the long-term issuer default ratings (IDR) of both banks at “BBB,” while maintaining their government support ratings at “bbb” and short-term ratings at “F2.”
The outlook revision mirrors Fitch’s recent shift on the Philippines’ own “BBB” credit rating, highlighting the intrinsic link between the policy banks and the government’s creditworthiness.
Fitch noted that the ratings of both institutions are driven by the expectation of state support rather than their standalone credit strength.
Fitch cited LandBank’s systemic importance as a key factor, noting it holds approximately 14% of the country’s system deposits.
The agency highlighted the bank’s mandate in agrarian reform, agriculture and fisheries financing, rural development, and financial inclusion for micro, small, and medium enterprises.
DBP was affirmed as a critical financing arm for the government’s industrial development and infrastructure projects.
“A sovereign downgrade would drag down both banks’ government support ratings and long-term ratings,” Fitch said in its assessment.
The ratings agency added that the outlook for both lenders could return to stable only if the Philippine sovereign outlook is restored to stable, provided the state’s propensity to support the banks remains unchanged.
