Fitch affirms RCBC rating at 'BB-' and stable

Fitch Ratings’ in Singapore has affirmed Friday Rizal Commercial Banking Corp's (RCBC) ratings, including its 'BB-' Long-Term Foreign and Local Currency Issuer Default Ratings at 'BB-'. “The Outlook is Stable," Fitch said in a statement. The affirmation, the credit rating agency said, takes account of RCBC's asset quality risks but also its improved capital, and satisfactory earnings profile and reserves. “Despite the broadly steady economic outlook in the Philippines, the bank faced some one-off asset quality setbacks in 2009-2010 in a few large corporate loans, reflecting the risks of a concentrated loan book common in many rated Philippine banks," Fitch Ratings said. RCBC’s associated credit costs were covered by earnings, capital remained intact, and residual provisioning risks on non-performing loans (NPL) were low in view of the 94 percent NPL reserve coverage as of end-June 2011. Satisfactory economic prospects While the weakening of RCBC’s asset quality is faster than those of its local peers, Fitch said it views any significant deterioration as a low prospect given Philippines' largely satisfactory economic prospects, barring any unforeseen major global events. The bank's loss-absorption capacity improved following two private placements in the first half of 2011, which lifted its core Tier 1 capital adequacy ratio (CAR) to about 13 percent as of end-June 2011 from 10.7 percent as of end-2010, Fitch noted. “Nevertheless, like other domestic banks, RCBC's Fitch core capital position is just adequate by international comparison," said the credit rating agency. A long-term prospect for another rating upgrade will reflect on the bank’s considerable and sustained improvement in asset quality, Fitch said, noting RCBC’s provisioning risks from its investment properties and deferred charges, which equaled 51 percent of core equity as of end-June. — VS, GMA News