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Rating Action:

Moody's concludes review of BPI; assigns positive outlook to four Philippine banks

29 May 2012

Singapore, May 29, 2012 -- Moody's Investors Service has downgraded the local-currency deposit rating of Bank of the Philippine Islands (BPI) to Ba1/NP from Baa2/P-2, following the revision of its standalone bank financial strength rating (BFSR) to D from C-. The BFSR now maps to a baseline credit assessment (BCA) of ba2 on the long-term scale. The downgrade of BPI's standalone rating is the result of an ongoing global review affecting all banks whose standalone ratings are higher than the rating of the country where they are domiciled. At ba2, the standalone rating is now at the same level as that of the government of the Philippines. Our systemic support assumptions remain unchanged, which now translates into a one-notch uplift of the local currency deposit rating of Ba1.

These rating actions conclude the review for downgrade on the bank's C- BFSR and Baa2/P-2 local-currency deposit ratings that was initiated on 18 April 2012. The outlook on these ratings is stable.

At the same time, to reflect the positive outlook assigned to the government of the Philippines on May 29, Moody's has revised the outlook of the supported ratings of four Philippine banks, including BPI's, to positive from stable: Ba2 foreign currency deposit rating and Ba2 foreign currency senior unsecured debt rating.

RATINGS RATIONALE

CONCLUSION OF REVIEW OF BPI

The rating action is driven by Moody's revised assessment of the linkage between the credit profiles of sovereigns and financial institutions globally, which is discussed in the rating implementation guidance "How Sovereign Credit Quality May Affect Other Ratings" published on 13 February 2012, and further detailed in the special comment "Banks and Sovereigns: Risk Correlations Constrain Standalone Bank Credit Assessments" published on 30 April 2012.

As per the guidance, the downward revision in BPI's standalone rating reflects Moody's view that a bank's rating ultimately cannot be completely de-linked from the credit quality of the government's creditworthiness.

"BPI's ba2 standalone BCA places it at the same level as the Philippines' sovereign rating, capturing the bank's limited insulation from a government debt crisis compared with global peers," says Simon Chen, a Moody's analyst.

"BPI has a substantial direct exposure to the government in the form of holdings of government securities. It also has a low level of cross-border diversification in terms of operations and earnings," he adds.

The BCA takes into account the balance of the bank's intrinsic strengths and weaknesses, including its reputable domestic brand, established position in corporate and consumer banking, and above-industry average financial fundamentals. The other positive components of its credit profile include its consistent profitability, and its capital and liquidity buffers which have remained stable despite business growth.

At the same time, the BCA recognizes the asset quality challenges that arise from the bank's exposure to manufacturers which are vulnerable to the persistently weak external environment. Overall, its credit profile is comparable with similar D rated banks globally.

BPI's long-term local currency deposit rating of Ba1 incorporates Moody's assessment of very high systemic support, which the bank is likely to receive, should the need arise. Its long-term foreign currency deposit rating of Ba2 is constrained by the Philippines' foreign currency deposit ceiling of Ba2.

REVSION OF OUTLOOK

The rating actions are in line with the revision of the outlook on the Philippines sovereign's foreign currency deposit ceiling to positive from stable.

The affected banks' foreign currency deposit ratings are constrained by the foreign currency deposit ceiling.

The affected banks are: (1) BDO Unibank, Inc, (2) Bank of the Philippine Islands, (3) Land Bank of the Philippines, and (4) Metropolitan Bank and Trust Company. Except for the foreign currency deposit rating, all other ratings of the banks carry a stable outlook.

The sovereign rating action on the Philippines is discussed in greater detail in a Moody's press release of May 29, 2012.

The ratings of the four banks are listed below.

BDO Unibank, Inc

Bank Financial Strength Rating (BFSR) of D, which maps to ba2 on the long-term scale

Global local currency deposits rated Ba1/Not Prime

Foreign currency deposits rated Ba2/Not Prime

Foreign currency senior unsecured debt rated Ba2

Bank of the Philippines Islands

BFSR of D, which maps to ba2 on the long-term scale

Global local currency deposits rated Ba1/Not Prime

Foreign currency deposits rated Ba2/Not Prime

Land Bank of the Philippines

BFSR of D-, which maps to ba3 on the long-term scale

Global local currency deposits rated Ba1/Not Prime

Foreign currency deposits rated Ba2/Not Prime

Metropolitan Bank and Trust Company

BFSR of D, which maps to ba2 on the long-term scale

Global local currency deposits rated Ba1/Not Prime

Foreign currency deposits rated Ba2/Not Prime

Local currency subordinated debt rated Ba2

Foreign currency hybrid tier-1 rated B2(hyb)

PRINCIPAL METHODOLOGIES

The methodologies used in these ratings were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: Global Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant 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.

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Information sources used to prepare each of the ratings are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Simon Hock Soon Chen
Analyst
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
SUBSCRIBERS: (65) 6398-8308

Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (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
SUBSCRIBERS: (65) 6398-8308

Moody's concludes review of BPI; assigns positive outlook to four Philippine banks
No Related Data.
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