Moody’s Investors Service has affirmed the investment-grade Baa2 credit rating and stable outlook of BDO Unibank Inc., the largest bank in the Philippines.
According to Moody’s, the affirmation of BDO’s ratings reflects the bank’s stabilizing asset quality, strong capital and adequate profitability.
The credit rating agency said funding remains a key credit strength, underpinned by its extensive deposit franchise as the largest Philippine bank by deposits.
BDO’s asset quality should continue to benefit from the strong post-pandemic economic recovery in the Philippines. Its gross non-performing loans (NPL) ratio at the end of 2022 declined to percent from 2.9 percent a year earlier.
While the recent rapid increase in domestic interest rates to the highest level since the 2008 global financial crisis poses asset risks, the bank’s strong loan loss buffers will cushion the impact.
BDO’s problem loan coverage was 138 percent as of the end of 2022, which is at a strong level.
However, Moody’s warned that the bank’s significant credit concentration to large domestic corporates, a structural feature of the Philippine banking system, remains a key asset risk.
Capital, with a common equity tier 1(CET1) ratio of 13.4 percent as of the end 2022, is expected to remain stable over the next 12 to18 months as internal capital generation will likely keep pace with balance sheet growth and dividends.
Moody’s also expects the bank’s profitability to remain stable over the next 12 to 18 months, driven by a stable net interest margin (NIM).
Funding is a key credit strength, as seen in a very high 79 percent ratio of low-cost current and savings deposits in total deposits as of the end of 2022, and will remain stable over the next 12 to18 months.
Moody’s expects the bank to benefit from a flight to quality during periods of market stress.
Liquidity is healthy, with a liquidity coverage ratio of 141 percent as of the end of 2022, and the bank is consistently a net lender in the interbank market.
The listed bank owned by the late taipan Henry Sy reported total assets of P4.1 trillion as of end 2022.
