Moody's affirms PNB ratings after merger with Allied Bank

Moody's Investors Service on Friday affirmed its rating on Philippine National Bank debts with a stable outlook but withdrew all ratings on Allied Banking Corp. following the Feb. 9 merger between the banks.

 

The debt watcher affirmed a Ba2 rating on PNB's foreign currency deposits and Ba3 on subordinated debts, and kept a positive outlook on PNB's standalone bank financial strength rating (BFSR) of E+ which maps to a baseline credit assessment of b1.

 

The positive outlook reflects expectations of improvements in financial performance with regards to cost efficiency and asset quality—likely bringing the bank's credit profile closer to the industry average in one to two years, Moody's noted.

 

PNB is the surviving entity after the merger.

 

"While the merger will pose some integration challenges, these difficulties are expected to be manageable given the alignment of work streams and processes that has taken place since the merger plan started being implemented in 2008," Moody's said.

 

Once the expectations of positive benefits from the merger have been met, Moody's will assess the merit of upgrading PNB's financial strength rating based on how results of the business combination from an accounting point of view.

 

"Nonetheless, the stable outlook on PNB's long-term ratings signals that  its deposit and subordinated ratings are unlikely to be upgraded in the short-term, even if the BFSR were to be upgraded," Moody's noted.

 

After the merge, PNB's share of system deposits is 7 percent and its share of system loans is 6 percent, according to Moody's estimates. Its share of system deposits and loans before the merger was about 4 percent.

 

"While PNB's systemic importance has increased, its larger share of system deposits and loans is insufficient to result in an upgrade of its long-term rating unless the bank's BFSR is upgraded by two notches, all other assumptions remaining equal," the debt watcher said. — VS, GMA News