S&P downgrades BPI, Security Bank ratings outlook

S&P Global Ratings on Tuesday downgraded its outlook on both the Bank of the Philippine Islands and the Security Bank Corporation, with the economy projected to contract as much as 9.5% this year amid the COVID-19 pandemic.

In an advisory, S&P revised its rating outlook for both banks to negative from stable, indicating that the ratings may be lowered.

The credit watcher, however, kept the BPI issuer credit ratings at 'BBB+/A-2,' and Security Bank's at 'BBB-/A-3,' both still at investment grade level.

Under the S&P credit scale, a BBB rating indicates that an obligor has "adequate capacity" to meet its financial obligations, but adverse economic conditions are likely to weaken such capacity.

"The economic risk trend for banks operating in the Philippines has turned negative, in our view. We believe that the risk of credit losses soaring for Philippine banks is higher than we expected, given challenging economic conditions," S&P said.

"We see at least a one-in-three chance that economic risks facing the Philippine banking industry could increase over the next six to 24 months," it added.

This comes as nonperforming loans (NPLs) of Philippine banks rose by 80 basis points in the eight months ended August to 2.8%, mainly due to housing and auto loans.

BPI ended the first half of 2020 as the fourth-largest bank in the country in terms of total assets with P1.951 trillion, while Security Bank was eighth with P738.583 billion.

"The economic recession is likely to impair the debt-servicing ability of consumers, small businesses, and leveraged companies. We believe large conglomerates are better placed to weather the storm on the back of their strong business positions and good access to liquidity," said S&P.

"However, risks are rising and the performance of these conglomerates will depend on economic recovery as well as stabilization of credit conditions," it added.

Fitch Ratings on Tuesday affirmed the credit ratings of BDO Unibank Inc., BPI, the Metropolitan Bank & Trust Company (Metrobank), and the Philippine National Bank (PNB). — Jon Viktor D. Cabuenas/BM, GMA News