Moody’s affirms ratings, outlooks for BPI and Metrobank

Moody’s Ratings has affirmed its ratings and outlooks for Bank of the Philippine Islands (BPI) and Metropolitan Bank & Trust Co. (Metrobank) on expectations of stable profitability.

“The affirmation of BPI’s and MBT’s Baa2 ratings and baa2 Baseline Credit Assessments (BCA) reflects the banks’ strong funding and liquidity supported by leading domestic franchises, as well as Moody’s expectations that their asset quality and profitability will remain stable,” the credit rater said in a statement on Wednesday.

It also kept its stable rating outlooks on the banks.

The debt watcher said the two lenders have ample capital to cushion risks arising from their expansion into the higher-risk retail lending segments.

Both BPI and Metrobank’s nonperforming loan ratios are expected to remain stable at around 2.1% and 1.7%, respectively, driven by improvements in their commercial and mortgage loan books.

Moody’s Ratings also sees BPI’s consumer loans to grow at a faster pace compared to Metrobank, with both banks expected to have steady net interest margins as rates are expected to remain higher for longer.

Meanwhile, provisioning costs will remain low amid stabilizing asset quality and loan loss coverage accumulated over the pandemic.

The credit rater said both lenders’ return on assets (ROA) are likely to remain stable, with BPI’s ROA in 2024 to be higher at 1.7% compared with Metrobank’s 1.4% as the former has more consumer loans in its portfolio.

However, Moody’s Ratings said Metrobank’s capital ratio will slightly decline as loan growth accelerates, while BPI’s will remain stable.

“Both banks’ capital ratios will hover at a strong level of around 15% over the next 12-18 months,” it said.

The two banks could see a modest increase in reliance on market funds, similar to pre-pandemic levels, while deposits will continue to be mostly funded by low-cost current account, savings account or CASA deposits.

BPI and Metrobank are seen to remain adequately liquid despite faster loan growth in the next 12-18 months as both banks ended 2023 with strong liquidity coverage ratios (LCR).

Metrobank’s LCR was better at 270% versus BPI’s 207%, Moody’s Ratings said.

It added that both lenders will likely get support from the government due to their large market shares in terms of total assets, which is at 11.5% for BPI and 12.3% for Metrobank.

Moody’s Ratings said both banks are unlikely to see upgrades to their BCAs and ratings given the debt watcher’s stable outlook on the sovereign.

However, a downgrade in sovereign rating or a significant increase in party lending will result in the lenders’ BCAs and long-term ratings.

“Moody’s could lower the banks’ BCAs if there is a significant deterioration in their solvency metrics, where their problem loan ratios rise above 3% and Moody’s-adjusted tangible common equity/risk-weighted assets ratios decrease to below 12%,” the debt watcher said. — Aaron Michael C. Sy