Singapore, January 22, 2019 -- Moody's Investors Service has affirmed the Baa2 local and foreign currency
deposit ratings of BDO Unibank, Inc. (BDO) and Metropolitan
Bank & Trust Company (MBT).
At the same time, Moody's has affirmed BDO and MBT's baa2 baseline
credit assessments (BCA) and adjusted BCAs, P-2 local and
foreign currency short-term deposit ratings, Baa1/P-2
local and foreign currency counterparty risk ratings, and Baa1(cr)/P-2(cr)
counterparty risk assessments.
For BDO, Moody's has also affirmed the bank's Baa2 foreign
currency senior unsecured rating and (P)Baa2/(P)P-2 foreign currency
senior unsecured MTN program rating. In addition, Moody's
has also affirmed BDO Unibank, Inc., Hong Kong Branch's
MTN program ratings at (P)Baa2/(P)P-2.
For MBT, Moody's has also affirmed the bank's Baa3 local
currency subordinate rating.
The ratings outlook, where applicable, is stable.
For a full list of affirmed ratings, please refer to the end of
this press release.
RATINGS RATIONALE
BDO
The affirmation of BDO's Baa2 deposit and senior unsecured debt rating
is based on the bank's BCA of baa2, and Moody's expectation that
there is a very high probability of the bank receiving systemic support
from the Philippine government (Baa2 stable) in times of need.
However, the ratings do not receive an uplift, because the
BCA is already at the same level as the sovereign rating.
The baa2 BCA takes into account BDO's: (1) domestically focused,
prominent, and growing franchise, (2) stable asset quality
and loss absorbing buffers; (3) sufficient capital levels that exceed
the regulatory minimum; (4) stable profitability, supported
by a gradual expansion in net interest margins; and (5) robust funding
and liquidity profile.
The BCA also incorporates the weaker aspects of BDO's credit profile,
including downside risks to loan quality posed by an unseasoned loan book
and high concentration risk.
The bank's reported nonperforming loan (NPL) ratio was stable at
1.1% as of the end of September 2018, compared with
1.2% as of year-end 2017 and 1.3% as
of year-end 2016.
The bank's capital is a credit strength, with a reported CET1
capital ratio of 12.3% as of 30 September 2018, slightly
lower than 12.9% as of year-end 2017 after the stock
rights issuance.
Over the last year, profitability has been supported by an increase
in net interest margins (NIM), on account of a rise in interest
rates.
BDO's funding and liquidity profile remains a key credit strength.
The bank has one of the highest share of low-cost current-account
and savings account deposits (of about 70%) in its deposit base
as of the end of September 2018.
Moody's does not incorporate affiliate support in the baa2 adjusted BCA
of BDO.
MBT
MBT's Baa2 deposit rating is underpinned by its baa2 BCA and Moody's expectation
of a very high probability of support from the Government of the Philippines
(Baa2 stable). The rating does not receive an uplift because the
bank's BCA of baa2 is already at the same level as the sovereign rating.
MBT's baa2 BCA reflects its (1) strong franchise in the corporate and
consumer segments of the domestic market as the second-largest
bank in the Philippines by assets; (2) robust capital and liquidity;
(3) stable asset quality, which reflects the bank's discipline and
prudence in growing its business; and (4) relatively high credit
risk concentration, exposing the bank to single-name credit
events or industry-specific cyclicality.
The bank's gross NPL ratio rose marginally to 1.2%
as of the end of September 2018, from 1.0% as of year-end
2017 (2016: 0.9%), and remains in line with
peer banks.
The bank's Common Equity Tier 1 (CET1) capital ratio improved to 15.2%
as of the end of September 2018 from 11.8% as of year-end
2017, supported by a PHP60 million stock rights issuance in April
2018.
The bank's return on assets improved slightly in the first nine
months of 2018 to 1.1% from 1.0% in 2017,
underpinned by its core lending operations and higher net interest margins.
MBT's funding and liquidity remain robust, reflected by its large
base of current and savings deposits, which account for 62%
of the bank's total deposits as of the end of September 2018,
as well as its large stock of liquid assets primarily in the form of cash
and Philippine government securities.
Moody's does not incorporate affiliate support in the baa2 adjusted BCA
of MBT.
WHAT COULD CHANGE THE RATINGS UP/DOWN
BDO
It is unlikely that BDO will be rated above the sovereign because there
is a high degree of risk correlation between the bank and the sovereign.
If Moody's upgrades the sovereign rating, the following factors
could result in an upward revision of BDO's rating and BCA: (1)
if the bank manages its growth while maintaining stable asset quality;
(2) if the bank maintains its profitability, as reflected in its
core earnings and credit costs; or (3) if the bank demonstrates a
stable loss-absorbing capacity, as reflected in its loan-loss
reserves and capitalization profile.
BDO's BCA and, consequently its ratings, could be lowered
if: (1) it demonstrates aggressive organic expansion, or its
acquisitions result in a significant deterioration in its risk profile;
(2) the bank's operating environment weakens significantly or its underwriting
practices loosen, resulting in a steady increase in its nonperforming
assets that erode its loss-absorbing buffers; or (3) there
is a material decline in the bank's capital buffers, such that its
Tier 1 ratio falls below 10%.
MBT
MBT's deposit rating of Baa2 is at the same level as the Philippines'
sovereign rating. It is unlikely that MBT's ratings will be higher
than that of the sovereign, given the high correlation between the
credit risks of the bank and the sovereign.
An upgrade of the sovereign rating would likely lead to an upgrade of
the bank's deposit ratings, assuming the bank's credit metrics remain
robust.
If the sovereign rating is upgraded, the following factors could
result in an upward revision of the bank's BCA: (1) a consistent
decrease in the bank's nonperforming assets, as represented by its
nonperforming loans (NPLs) and foreclosed assets; (2) a steady improvement
in its profitability, as reflected in an improvement in core earnings
and a decline in credit costs; or (3) higher loss-absorption
capacity, as reflected in a steady improvement in its capitalization.
MBT's subordinated debt rating is linked to its BCA and could be upgraded
when the bank's BCA is raised.
MBT's BCA could be lowered in case of (1) aggressive organic expansion
or acquisitions, resulting in a significant increase in the bank's
risk profile; (2) a significant deterioration in the operating environment
or loosening of underwriting practices, resulting in a steady increase
in its nonperforming assets and, in turn, an erosion of loss-absorbing
buffers; or (3) a material decline in the bank's capital buffers,
as a result of strong balance-sheet growth or credit losses.
LIST OF AFFECTED RATINGS
BDO UNIBANK, INC.
- Long-term local and foreign currency deposit ratings affirmed
at Baa2, with a stable outlook
- Short-term local and foreign currency deposit ratings
affirmed at P-2
- Long-term foreign currency senior unsecured debt ratings
affirmed at Baa2, with a stable outlook
- Long-term foreign currency senior unsecured MTN program
ratings affirmed at (P)Baa2
- Short-term foreign currency senior unsecured MTN program
ratings affirmed at (P)P-2
- Long-term local and foreign currency counterparty risk
ratings affirmed at Baa1
- Short-term local and foreign currency counterparty risk
ratings affirmed at P-2
- BCA and adjusted BCA affirmed at baa2
- Counterparty risk assessments affirmed at Baa1(cr)/P-2(cr)
- Outlook is stable
BDO UNIBANK, INC., HONG KONG BRANCH
- Long-term foreign currency senior unsecured MTN program
ratings affirmed at (P)Baa2
- Short-term foreign currency senior unsecured MTN program
ratings affirmed at (P)P-2
- Outlook is stable
METROPOLITAN BANK & TRUST COMPANY
- Long-term local and foreign currency deposit ratings affirmed
at Baa2, with a stable outlook
- Short-term local and foreign currency deposit ratings
affirmed at P-2
- Long-term local currency subordinate rating affirmed at
Baa3
- Long-term local and foreign currency counterparty risk
ratings affirmed at Baa1
- Short-term local and foreign currency counterparty risk
ratings affirmed at P-2
- BCA and adjusted BCA affirmed at baa2
- Counterparty risk assessments affirmed at Baa1(cr)/P-2(cr)
- Outlook is stable
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
BDO Unibank, Inc., headquartered in Manila, reported
total assets of PHP2.9 trillion (USD55.7 billion) on 30
September 2018.
Metropolitan Bank & Trust Company, headquartered in Manila,
reported total assets of PHP2.1 trillion (USD40.5 billion)
on 30 September 2018.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Srikanth Vadlamani
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
