Moody’s Investors Service has affirmed the Baa2 long-term deposit ratings of Bank of the Philippine Islands (BPI) led by bankero TG Limcaoco and Metropolitan Bank & Trust Co. (Metrobank) headed by bankero Fabian Dee.
The outlook for both listed banks remains stable, reflecting Moody’s expectations that both banks’ credit profiles will remain robust over the next 12 to 18 months.
The rating affirmations of both BPI and Metrobank reflect the banks’ strong capitalization, which provides adequate buffer against financial shocks as well as strong funding and liquidity, supported by leading domestic franchises.
Moody’s also expects the asset quality and profitability of both banks to improve over the next 12 to 18 months.
Both banks’ nonperforming loan ratios are seen declining to around two percent by the end of the year, in tandem with a rebound in economic activity in the Philippines.
“Significant loan concentration to the domestic corporates remains a key risk factor for both banks,” Moody’s said.
Moody’s expects the return on assets of both banks will improve to around 1.2 percent over the next 12 to 18 months, as net interest margins widen with rising interest rates, and provision expenses decline with the improving asset quality.
The capital ratio, as denoted by tangible common equity to adjusted risk weighted assets, for both banks will decline as loan growth recovers, but remain at a still-strong level of around 15 percent over the next 12 to 18 months.
The credit rating agency added that the funding structures of BPI and Metrobank would remain strong due to their strong deposit franchises.
Furthermore, it added that the likelihood of support from the Philippine government would remain very high for both BPI and Metrobank, given their systemic importance, as reflected by their system market shares by total assets of 10.9 percent and 11.3 percent, respectively.
BPI and Metrobank reported total assets of P2.4 trillion and P2.5 trillion, respectively, as of end 2021.