S&P reaffirms stable outlook on DBP

MANILA, Philippines - New York-based Standard & Poor’s yesterday reaffirmed its stable credit rating outlook on Development Bank of the Philippines (DBP) on the back of its healthy capitalization and profitability.

The credit rating agency affirmed the ‘BB-/B’ foreign currency rating and ‘BB+/B’ local currency rating as well as stable outlook on DBP.

S&P credit analyst William Hess said DBP has maintained strong profitability and capital adequacy last year despite a challenging environment brought about by the global financial crisis.

“Although DBP’s publicly reported interim financial results for 2009 indicate that asset quality may have slipped somewhat, as noted in the decline of its reported capital adequacy ratio to about 21 percent from 25 percent at year end 2008, we also believe the bank’s overall capitalization and profitability during 2009 continue to support the rating,” Hess stressed.

He pointed out that the non-performing assets of DBP did not likely increase last year from 3.38 percent of customer loans in 2008.

“DBP’s ratio of nonperforming assets fell to 3.38 percent of customer loans at the end of 2008, less than half of the industry average for the banking sector in the Philippines,” he added.

The stable rating outlook, according to him, reflects the stable rating outlook on the Philippine government.

Hess said S&P expects that DBP would remain an important instrument for the government in its medium-term development strategy.

“DBP is a critical public policy institution supporting the economic and social development agendas of the Philippine government, and equalization on the ratings with the sovereign reflects our opinion that there is an almost certain likelihood that the government would provide timely and sufficient extraordinary support to DBP in the event of financial distress,” the analyst added.

Earlier, DBP president Reynaldo David reported that the bank’s net income almost doubled to a record high of P6.09 billion last year from P3.6 billion in 2008 due to higher interest income.

The bank’s loan portfolio including for various developmental projects such as at Sustainable Logistics Development Program (SLDP) stood at P167.01 while total available funds for lending reached P74.4 billion.

David also said the total assets of DBP went up by almost 11 percent to P292 billion last year from P263.25 billion in 2008 while its capital adequacy ratio stood at 21 percent or more than double than the 10 percent requirement of the central bank.