Fitch attests to Manila lenders' credit standing

Posted at 07/28/14 8:09 AM

MANILA - Fitch Ratings affirmed the credit standing of four Philippine banks on the basis of their sound funding profiles and high loss-absorption capacities.

In a recently released statement, Fitch affirmed the ratings China Banking Corp., Security Bank Corp., Rizal Commercial Banking Corp. (RCBC) and the Union Bank of the Philippines.

“In Fitch’s view, these banks are in a good position to weather reasonable deterioration in the operating environment due to their sound funding profiles and high loss-absorption capacity,” Fitch Ratings said.

“All of the four banks aim to increase their lending into the consumer and SME [small and medium enterprise] sectors, although any meaningful progress in this area through organic growth is likely only over the medium term,” it added.

The ratings agency, which was the first to upgrade the country’s sovereign rating to investment grade in 2013, also lauded the efforts of the Bangko Sentral ng Pilipinas to put a cap on excessive lending to certain sectors, especially in real estate.

“The central bank has been monitoring the real estate sector and currently limits real-estate exposure to 20 percent of the banks’ loan book.

However, it may change this limit or the types of loans covered to facilitate further economic growth and better manage various property-related risks,” the ratings agency said.

“The central bank has already taken some measures to avoid excessive risks building up within the system, and Fitch expects further measures to be taken should risks continue to rise,” Fitch said.

However, Fitch warned that the ratings and outlooks may change if the banks’ loan absorption capacities decelerate due to too much risk taking.

“The VRs [Viability Ratings] of China Bank, Security Bank and RCBC could come under pressure should the banks’ loss-absorption capacities weaken significantly in the face of event risks, such as sizeable takeovers, aggressive growth plans or a material increase in risk appetite, including increasing concentration of exposures, unseasoned portfolios and excessive lending to the volatile property sector,” Fitch said.

Fitch also said that they have affirmed the ratings of Union Bank, but simultaneously withdrawn them.

“At the same time, the agency has affirmed Union Bank of the Philippines’s [UnionBank] Long-Term IDR [Issuer Default Ratings] at ‘BB-’ and its VR at ‘bb-’ and simultaneously withdrawn them. Fitch has chosen to withdraw the ratings of UnionBank for commercial reasons. The outlook for the bank remains positive,” Fitch said.

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