Moody’s releases credit rating of 3 PH banks

RIZAL Commercial Banking Corp. (RCBC) has had its investment-grade credit rating downgraded by Moody’s Investors Service while Security Bank Corp. and China Banking Corp. have had theirs maintained.

The credit rating agency said in statements on Friday that it has downwardly adjusted RCBC’s deposit and senior unsecured ratings to “Baa3” from “Baa2,” with a stable outlook.

“The downgrade is driven by weak asset quality and deterioration in capital,” it underscored.

Moody’s said the Yuchengcoled lender’s asset quality remains weak, noting that while the gross nonperforming loans (NPL) ratio has remained consistent, at 5.2 percent as of September 2021, compared to 5.4 percent at the end of December 2020, provision coverage has decreased to 64 percent from 74 percent.

RCBC’s restructured loans not classified as NPLs are also greater than other rated Philippine banks, accounting for roughly 6 percent of the loan book as of September 2021, according to the credit watchdog.

The bank’s loan growth has outpaced the banking system, with a year-on-year loan pick up of about 13 percent at the end of September 2021, compared to 3 percent for the system.

“This poses downside risks to asset quality,” it warned.

Moody’s also said the significant loan growth has had an impact on capital, with the common equity tier 1 falling to 12.1 percent by the end of September 2021 from 12.6 percent at the end of 2020. “Capital will further fall as Moody’s expects the bank to maintain strong loan growth,” it went on to say.

Meanwhile, Security Bank’s Baa2 long-term local and foreign currency bank deposit and senior unsecured ratings have been affirmed by the debt rater, with a stable outlook.

“The affirmation of Security Bank’s ratings reflects the bank’s strong and above-average capital position that offsets its elevated asset risks; average profitability; modest funding structure, reflecting its moderate deposit franchise as a medium-size bank in the Philippines; and adequate liquidity,” it continued.

China Bank’s Baa2 bank deposit and issuer ratings have also been maintained by Moody’s.

“The outlook, where applicable, remains stable as the bank’s improved capital and profitability mitigate risks to asset quality,” it said.