Fitch rates Bank of the Philippine Islands stable

Credit rating agency Fitch Ratings has given the Bank of the Philippine Islands a stable 'BB+' on its long-term foreign-currency (LTCF) issuer default rating (IDR) and its 'bbb-' viability rating.

 

BPI's viability rating is the highest among rated Philippine banks and is high compared with banks in sub-investment-grade countries, according to Fitch.

 

The bank’s focus on costs and asset quality, together with a broad revenue base, substantiates the bank's higher profitability and better earnings resilience than its major domestic peers, it added.

 

A major acquisition, or unexpectedly heavy losses, together with weakened core capital, would be negative for BPI's ratings, although Fitch views this as a remote prospect because of BPI’s conservative record and solid balance sheet.

 

The bank's capital position has been its rating strength. It had a core Tier 1 capital adequacy ratio, or its capital to risk ratio of 14.6 percent at end-March 2012 and this is likely to remain well capitalized.

 

Moreover, reserves cover 98 percent of BPI's non-performing loans and 31 percent of investment properties compared to 83 percent and 26 percent at end-2010. This is due to pre-emptive provisioning efforts undertaken since 2008, Fitch noted.

 

The national and viability or credit-worthiness ratings reflect BPI's strong domestic franchise, broad earnings base, sound balance sheet and prudent management record, Fitch said.

 

The LTFC IDR is constrained by the sovereign's 'BB+' LTFC IDR given the close credit links arising mainly from the bank's sizeable government securities holdings, it added.

 

Fitch cited BPI's loan quality as reasonably healthy, even during the 2008-2009 global downturn and despite the risk of some concentration in large corporate accounts.

 

The Support Rating and Support Rating Floor, or a potential supporter's wish to support the bank and of its ability to support it, of BPI are driven by its systemic importance to the Philippine economy and are at the same level as other systemically-important banks in the country. 

 

“The bank is the third-largest Philippine bank, with a 12 percent share of system-wide assets, reflecting its leading domestic franchise. This further emphasizes its stable funding base and liquid balance sheet,” Fitch noted.

 

“The subordinated notes are rated one notch below the bank's 'AAA(phl)' national rating to reflect the subordination status and the absence of any going-concern loss-absorption mechanism.” Fitch added. —DVM/VS, GMA News