Fitch affirms ratings of 3 major Philippine banks

MANILA, Philippines - Global ratings agency Fitch Ratings has affirmed the credit ratings of three major Philippine banks at speculative grade amid sufficient funding and liquidity in the country’s financial system.

In a statement, Fitch said it has affirmed the long-term Issuer Default Ratings (IDRs) of Rizal Commercial Bank Corp. (RCBC), Security Bank Corp., and China Banking Corp. at ‘BB.’

“The ratings reflect their higher risk appetite, adequate capitalization, sound funding and liquidity, and their small yet meaningful market shares,” Fitch said.

“The stable outlooks on all three banks reflect Fitch’s view their financial profiles will likely remain steady over the near to medium term in light of sustained economic growth, a fairly conservative regulatory environment, and sufficient funding and liquidity in the system that is supported by strong inflows from overseas workers,” the ratings agency said.

‘BB’ ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time. However, business or financial flexibility exists which supports the servicing of financial commitments.

The debt watcher pointed out it expects RCBC, Security Bank, and China Bank to continue expanding their branch networks to support deposit and loan growth.

It added the three banks could undertake acquisitions to enhance their franchises and market positions.

Fitch said loans growth would likely stem from infrastructure and power projects and the SME and consumer segments that are higher-yielding and underpenetrated.

 The debt watcher also cited regulatory changes announced in 2014 aimed at strengthening the banks’ underwriting practices and cooling down the real estate sector.

“The ratings also capture Fitch’s expectation the banks will maintain sound capital buffers to balance loan growth and potential loan deterioration,” it said.