Fitch upgrades 2 PHL banks, affirms ratings

Fitch Ratings upgraded on Thursday two Philippine banks' Long-Term Issuer Default Ratings (LT IDRs), while also revising their Support Rating Floors together with those of three other banks, at the same time affirming all other ratings of all five domestic banks. “The positive rating actions follow the upgrade of Philippines' sovereign ratings as well as Fitch's expectations of a stable domestic economic outlook, which will be supportive of the local banks' performance and credit profiles," said Alfred Chan, director with Fitch's Financial Institutions group. The LT IDRs of Bank of the Philippine Islands (BPI) and Development Bank of the Philippines (DBP) have been upgraded. BPI’s local currency IDR was raised to “BBB-“ while its foreign currency IDR climbed a notch to “BB+". [See: BPI Q1 earnings up 4.5%] The foreign currency and peso IDRs of DBP now have “BB+" ratings. [See: DBP sells $300M in global notes; senior bonds rated 'BB'] BPI’s and DBP’s Support Rating Floors were also revised upward together with those of Banco de Oro Unibank Inc. (BDO), Metropolitan Bank & Trust Co. (Metrobank) and Land Bank of the Philippines (LBP). Fitch also said it made revisions on the expectation that these “systemically important banks" have a higher probability of receiving state support “in the event of need." The affirmation of BPI's and DBP's ratings reflects Fitch's expectation that these banks will maintain their fairly strong financial profiles, including their high capitalization, satisfactory earnings base and prudent management records. LT IDRs, Support Rating Floors explained Fitch explained that LT IDRs take into consideration “an entity’s relative vulnerability to default on financial obligations." LT IDRs generally also address a banking institution’s “relative vulnerability to bankruptcy, administrative receivership or similar concepts." In other words, it measures the risks of a bank not being able to pay up. The Support Rating Floor indicates the minimum LT IDR that would be assigned to these banks, even if their standalone financial condition were to hypothetically deteriorate. In other words, the Support Rating Floor sets the lower limit showing how robust the “riskiness" of a bank could get despite falling into bad times. — Marlon Tonson/ELR/VS, GMA News