INTERNATIONAL credit watcher Moody’s Investor Service has affirmed the ratings of two local banks and downgraded one bank’s rating over the weekend.
In separate statements, Moody’s has affirmed the long term deposit ratings of China Banking Corp. and Security Bank Corp. It has, however, downgraded the long term deposit rating of Rizal Commercial Banking Corp. (RCBC).
For Chinabank and Security Bank, the international credit watcher said both banks had relatively stable metrics amid the pandemic.
Security Bank, in particular, was retained at Baa2 as it was assessed to have a strong and above-average capital position that offsets its elevated asset risks and average profitability.
Moody’s also noted Security Bank’s modest funding structure reflecting its moderate deposit franchise as a medium-size bank in the Philippines and adequate its liquidity.
The international credit watcher said while an upgrade is unlikely for Security Bank, a downgrade is possible if its asset quality deteriorates, its capital buffer materially declines or its core profitability declines to below a certain threshold.
For Chinabank, Moody’s retained the bank’s Baa2 ratings noting its improved capital and profitability which mitigates risks to asset quality.
Moody’s also said Chinabank’s capital will remain stable over the next 12 to 18 months, with upside potential, as balance sheet growth will be muted.
On the other hand, the ratings agency downgraded the rating of RCBC from Baa2 to Baa3.
“The downgrade is driven by weak asset quality and deterioration in capital,” Moody’s said.
“The bank’s loan growth has been significantly higher than the system, with year-on-year loan growth of 13 percent at end-September 2021 compared to 3 percent for the system. This poses downside risks to asset quality,” Moody’s said.
“The strong loan growth has also impacted capital, with the Common Equity Tier-1 as of end September 2021 declining to 12.1 percent from 12.6 percent as of the end 2020. Capital will further fall as Moody’s expects the bank to maintain strong loan growth,” it added.