Moody’s Ratings has revised the outlook on the credit ratings of Rizal Commercial Banking Corp. (RCBC) to negative from stable, citing expectations that the lender’s solvency metrics will weaken as asset quality deteriorates.
The rating agency warned that the change in outlook could lead to a downgrade of the bank’s credit rating over the next 12 to 18 months.
Moody’s pointed out that asset quality challenges are stemming from unsecured retail loans and exposures to small and medium-sized enterprises (SMEs), with higher risks driven by a weakening economic environment amid high inflation.
“The latter will further constrain borrowers’ debt repayment capacity, exacerbating risks in RCBC’s retail portfolio, which has expanded rapidly in recent years, with retail loans growing by 40 percent in 2024 and 29.4 percent in 2025,” Moody’s said.
As of end-March 2026, the Yuchengco-led bank’s nonperforming loan (NPL) ratio rose to 5.0 percent from 4.3 percent a year earlier, driven by weakening SME and credit card portfolios.
Credit costs also increased to 2.4 percent from 1.6 percent over the same period.
“We expect asset quality to deteriorate further over the next 12 to 18 months. Meanwhile, loan loss reserves relative to NPLs stood at 57 percent as of March 2026, a modest level and unchanged from a year ago,” the debt watcher added.
The rating agency said it could downgrade RCBC’s deposit ratings and Baseline Credit Assessment (BCA) if asset quality worsens further, resulting in credit costs that weaken the return on tangible assets (ROTA) ratio to below 0.3 percent and the tangible common equity (TCE)/risk-weighted assets (RWA) ratio to below 13 percent.
Annualized ROTA stood at approximately 0.8 percent in the first quarter of 2026, up from 0.7 percent a year earlier, which Moody’s described as “modest relative to peers.”
“Over the next 12 to 18 months, we expect profitability to come under pressure from higher credit costs,” Moody’s said. While the bank’s TCE-to-RWA ratio was stable year-on-year at 15.4 percent at the end of 2025, Moody’s noted that asset quality and profitability pressures would weigh on capital. “Nonetheless, we expect loan growth to moderate, which will partly offset pressure on capital consumption,” Moody’s said.
On July 1, Moody’s affirmed RCBC’s Baa3/P-3 long-term and short-term foreign-currency deposit ratings, alongside its ba1 BCA, reflecting the bank’s modest solvency and average funding.
The bank’s Baa3 rating sits one notch above its BCA, reflecting a moderate likelihood of support from the Philippine government (Baa2 stable), given RCBC’s 4.8 percent share of total system deposits as of March 2026.
However, Moody’s noted that a sovereign downgrade or a significant weakening in the bank’s funding and liquidity would trigger a negative rating action.
Moody’s said an upgrade is unlikely while the bank is on a negative outlook, but it could revise the outlook to stable if the TCE/RWA ratio is maintained at around 15 percent, asset quality pressures ease, and the ROTA ratio stays above 0.5 percent.
