Research: Rating Action: Moody’s Affirms Philippine National Bank Baa3 Deposit Ratings; changes the outlook from negative to stable

0

Singapore, November 09, 2022 — Moody’s Investors Service has affirmed the Baa3 long-term deposit ratings and ba1 Base Credit Assessment (BCA) of the Philippine National Bank (PNB).

At the same time, Moody’s changed the rating outlook from stable to negative, reflecting the agency’s expectation that PNB’s asset quality will be stable, while its profitability will gradually improve, supporting its overall credit profile. .

The full list of affected ratings is provided at the end of this press release.

RATINGS RATIONALE

The affirmation of the PNB ratings and the revision of the outlook from stable to negative was driven by an improvement in the quality of the bank’s assets over the past 12 months.

The bank’s non-performing loan (NPL) ratio improved to 6.5% at the end of June 2022, from 11.5% a year ago, thanks to a normalization of loan repayments by a few large exposures in sectors affected by the pandemic such as travel and tourism. Moody’s expects the bank’s asset quality to remain stable over the next 12 to 18 months as its problem old loans are broadly classified as NPL, while its underwriting of new loans has been cautious over the past two months. last years.

PNB’s Common Equity Tier 1 (CET1) ratio increased to 14.5% at the end of June 2022, from 13.2% a year ago, due to moderate balance sheet growth and a reduction in NPLs. Its capital will remain stable over the next 12 to 18 months as its balance sheet growth will remain moderate.

PNB’s core profitability is below that of its peers and is a key credit weakness. However, it will benefit from a normalization of credit costs, in line with the improvement in asset quality.

Financing is a credit force of PNB. Its cost of funding is comparable to that of the big three Philippine banks, helped by its high share of deposits in checking accounts and savings accounts.

PNB’s Baa3 rating is a notch above its ba1 BCA, reflecting a strong likelihood of support from the Philippine government (Baa2 stable) when needed, given the bank’s high systemic importance, as evidenced by its share. market share by total assets of 5.6% as of June 30, 2022.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

Moody’s could improve BCA and PNB ratings if (a) its asset quality significantly strengthens, with its NPL formation rates returning to pre-pandemic levels for an extended period, and (b) its pre-provision profitability is improving.

However, Moody’s could downgrade the ratings of PNB and BCA if its asset quality and capital deteriorate significantly.

MAIN METHODOLOGY

The main methodology used in these ratings is the Methodology for Banks published in July 2021 and available on https://ratings.moodys.com/api/rmc-documents/71997. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

The Philippine National Bank, headquartered in Manila, reported total assets of PHP 1.2 trillion as of June 30, 2022.

LIST OF AFFECTED RATINGS AND EVALUATIONS

..Issuer: National Bank of the Philippines

…. Baseline credit rating adjusted, confirmed ba1

…. Basic credit assessment, Confirmed ba1

…. Assessment of short-term counterparty risk, confirmed P-2(cr)

…. Long-term counterparty risk assessment, Baa2(cr) confirmed

…. Short-term counterparty risk rating (foreign and local currency), confirmed P-2

…. Long-term counterparty risk rating (foreign and local currency), Baa2 confirmed

…. Short-term deposit rating (foreign and local currency), confirmed P-3

…. Long-term deposit rating (foreign and local), Baa3 affirmed, outlook changed to stable from negative

….Senior Unsecured Medium Term Note Program (Foreign Currency), Confirmed (P)Baa3

….Senior regular unsecured bond/debenture (foreign currency), Baa3 confirmed, outlook changed to stable from negative

….Outlook, changed to stable from negative

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Srikanth Vadlamani
VP – Senior Credit Officer
Financial Institutions Group
Moody’s Investors Service Singapore Pte. ltd.
71 Robinson Road #05-01/02
Singapore, 068895
Singapore
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

Alka Anbarasu
Associate General Manager
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

Release Office:
Moody’s Investors Service Singapore Pte. ltd.
71 Robinson Road #05-01/02
Singapore, 068895
Singapore
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

Share.

About Author

Comments are closed.