MOODY’S Investor Service (Moody’s) has affirmed the “Baa2” local and foreign deposit rating for the country’s largest bank, BDO Unibank Inc. (BDO) on the back of expectations that it will benefit from the country’s pandemic recovery.
In a statement, Moody’s said it affirmed BDO’s Baa2/P-2 long-term (LT) and short-term (ST) local and foreign currency bank deposit ratings as well as Baa2 foreign currency senior unsecured rating.
The credit watchdog also said BDO’s “(P)Baa2/(P)P-2” foreign currency senior unsecured medium-term note (MTN) and other ST program ratings, and “baa2” Baseline Credit Assessment (BCA) and “adjusted BCA” were also affirmed.
“The affirmation of BDO’s ‘Baa2’ deposit and senior unsecured debt ratings reflects the bank’s stabilizing asset quality, strong capital and adequate profitability. Funding will remain a key credit strength, underpinned by its extensive deposit franchise as the largest Philippine bank by deposits,” Moody’s said. “BDO’s asset quality should continue to benefit from the strong post-pandemic economic recovery in the Philippines.”
The ratings agency, however, noted that BDO’s gross non-performing loans (NPL) ratio at the end of 2022 declined to 2 percent from 2.9 percent last year while other asset quality indicators such as “net NPL formation” and “stage-2 loans ratio” improved.
The bank’s problem loan coverage was 138 percent as of the end of 2022, which is at a strong level, Moody’s said. However, it noted that the bank’s credit concentration to large domestic corporates, a structural feature of the Philippine banking system, remains a key asset risk.
The credit watcher also expects the bank’s profitability to remain stable over the next 12-18 months, driven by a stable net interest margin.
Moody’s also expects the bank to benefit from a flight to quality during periods of market stress. BDO’s credit strength is also expected to remain stable over the next 12-18 months.
BSO reported total assets of P4.1 trillion as of December 31, 2022.