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Moody’s upgrades LandBank’s rating

Moody’s Investors Service has affirmed the Baa2/P-2 long-term and short-term deposit ratings of Land Bank of the Philippines (LBP).
In addition, Moody’s has upgraded the baseline credit assessment and Adjusted BCA of LBP to ba1 from ba2.
Moody’s has also affirmed LBP’s Counterparty Risk Assessment (CR Assessment) of Baa2(cr)/P-2(cr).
The ratings outlook for LBP remains at stable.
The affirmation of LBP’s deposit ratings of Baa2 takes into account the one-notch upgrade of its BCAs to ba1, and a two-notch uplift to reflect Moody’s assumption that the bank will receive support from the Government of the Philippines (Baa2 stable) in times of need.
LBP’s Baa2 ratings remain at the same level as the Philippines’ sovereign rating, and incorporate Moody’s assessment of the probability of government support for the bank as “government-backed,” which is in turn
underpinned by the bank’s sizable market shares of domestic deposits and loans; full ownership by the Philippine government; and unique public policy role of financing the country’s priority sectors, including small farmers and fishermen; agribusinesses; as well as microenterprises and small and medium-sized enterprises.
The upgrade of LBP’s BCA takes into account the bank’s track record of steady asset quality and robust capital and liquidity buffers over the past three years.
In particular, the bank’s asset quality and capital buffers are comparable with those of its peers in the Philippines.
Nonetheless, the bank’s BCA remains lower than that of other Moody’s-rated Philippine banks with BCAs of baa2-baa3, and reflects its relatively weaker risk positioning, due to its high credit concentration to single industry and large borrowers, and weaker financial transparency.
The bank’s BCA also reflects the stable operating environment for banks in the Philippines, supported by a strong economy, and the private sector’s benign leverage and stable debt servicing metrics.
Philippine banks exhibit strong funding profiles that are dominated by deposits, and demonstrate little reliance on short-term wholesale funding.
These factors are incorporated in Moody’s assessment of the macro profile of the Philippines of Moderate(+).
LBP’s deposit ratings of Baa2 are at the same level as the Philippines’ sovereign rating. It is unlikely that the bank’s deposit ratings will be positioned higher than the sovereign rating, given the high correlation of credit risk between the bank and the sovereign.
Assuming that LBP’s credit metrics remain robust, an upgrade of the sovereign rating would likely lead to an upgrade of the bank’s deposit ratings.
The following factors could result in an upward revision of LBP’s BCA: (1) an improvement in the timeliness and transparency of the bank’s financial reporting; and/or (2) significantly lower credit risk concentration to individual borrowers and industry groups.
LBP’s BCA and, consequently, its ratings could be downgraded if: the operating environment weakens significantly or underwriting practices become loose, resulting in a considerable deterioration in the bank’s asset quality; the bank’s nonperforming loans rise without a corresponding increase in loan-loss provisions; or its capital buffer declines materially, as a result of balance-sheet or credit losses.
The principal methodology used in these ratings was Banks published in September 2017.
Land Bank of the Philippines, headquartered in Manila, reported total assets of P1.48 trillion on September 30, 2017.

1 comment

  • Taga-ilog

    I monitor the real status of the Philippines or any institution through what the Rating Companies report. They know their credibility is at stake if they blend to any person or to any institution such as, for example, the CIA. It’s their business and that’s their business, to look for the truth about YOU. It is best to study them.

    Taga-ilog Thursday, 07 December 2017 08:41 Comment Link

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