Ayala-led Bank of the Philippine Islands (BPI) received a credit rating outlook boost from S&P Global Ratings as the listed bank is expected to benefit from the country’s improving economic condition.
The debt watcher has revised upward BPI’s credit rating outlook to stable from negative, while its credit rating was affirmed at BBB+ or two notches above minimum investment grade.
“The outlook revision reflects our view that BPI will benefit from improving economic conditions in the Philippines. The stable outlook on BPI reflects our view that the bank will maintain its dominant market position and strong capital buffers over the next two years,” S&P said.
According to S&P, BPI has a solid franchise and leading market position in the Philippines.
“It has a track record of consistent profitability across economic cycles, and is on a path to recovery from the pandemic. BPI could face headwinds from more infectious variants of the virus, which could strain asset quality. In our opinion, the bank is well placed to weather residual stress from a position of strength, with good capital and liquidity buffers,” it added.
BPI’s non-performing loan (NPL) ratio of BPO improved to 2.49 percent in December from a peak of 2.94 percent in June last year. Prior to the COVID-19 pandemic, BPI’s NPL ratio stood at 1.66 percent in 2019.
“The bank’s NPL ratio remains better than the industry average, reflecting prudent underwriting and selective lending practices. BPI’s credit costs fell significantly to 0.93 percent in 2021, from 1.96 percent in 2020, in tandem with the industry’s, reflecting improved macroeconomic conditions,” it said.
BPI’s risk-adjusted capital (RAC) ratio is seen remaining strong at 10.5 percent to 11.5 percent over the next two years.
“Healthy capitalization and a robust funding profile should continue to support BPI,” S&P said.
S&P believes Philippine banks are well placed to absorb this residual stress given their improved capitalization and adequate provisioning coverage.
It expects the profits of Philippine banks to strengthen this year resulting to a return on average assets returning to the pre-pandemic level of 1.2 percent from 1.1 percent in 2021.