Fitch Ratings Affirms Philippine Banks' Ratings Amid Challenging Outlook

(The following statement was released by the rating agency)
Fitch Ratings-Singapore-12 October 2020: Fitch Ratings has affirmed the
Long-Term Issuer Default Ratings (IDRs) on five privately owned banks in the
Philippines. The IDRs on four of the banks - BDO Unibank, Inc. (BDO,
BBB-/Stable/bbb-), Bank of the Philippine Islands (BPI, BBB-/Stable/bbb-),
Metropolitan Bank & Trust Company (Metrobank, BBB-/Stable/bbb-) and Philippine
National Bank (PNB, BB/Stable/bb) - are driven by our expectations of
extraordinary support from the sovereign, and our Stable Outlook on these
banks mirrors that on the Philippines (BBB/Stable). However, their standalone
credit profiles, as indicated by their Viability Ratings (VR), continue to be
under pressure amid the steep economic downturn, which also underpins our
Negative Outlook on China Banking Corporation's (CBC, 'BB+'/Negative/'bb+')
VR-driven IDR. The Philippines' economy is taking a severe blow from the
coronavirus pandemic, with GDP contracting by 9.0% in 1H20 - the worst in
south-east Asia - and we expect it to shrink 8.0% for the full year. We
forecast economic growth to rebound to 9.0% in 2021, but this in part reflects
a low base effect. Weak domestic consumption and accelerating credit
impairment are turning banks' operating environment more challenging. Revenue
tailwinds from aggressive monetary easing are also likely to dissipate by
2H20, and we see further asset-quality deterioration in 2021 after the debt
moratorium lapses. Credit costs are likely to remain elevated in 2021 even as
they decline from 2020's unusually high levels, which will exert continuing
pressure on earnings and profitability. The VRs of the three largest banks are
already one notch above our assessment of the operating environment, supported
by their strong franchise, business models and risk appetite, as well as their
funding and liquidity strengths which have proven durable during the early
phases of the pandemic. That said, there is no upside on their VRs unless the
operating environment improves notably. Earnings will weaken as credit
provisions spike, but the major banks have front-loaded such allowances in
2020 - a potential indication of a modest retracement in profitability in 2021
that should keep the banks' CET1 ratios stable under our base case. The
ratings and outlooks on the five banks will continue to be sensitive to
changes in their asset quality and appetite for risk amid the more challenging
outlook. They will also be influenced by any changes in the sovereign rating
and outlook on the Philippines, as the IDRs of four of them are
support-driven. Contact: Willie Tanoto Director +65 6796 7219 Fitch Ratings
Singapore One Raffles Quay, South Tower #22-11 Singapore 048583 Tamma Febrian
Associate Director +65 6796 7237

Media Relations: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email:
peter.hoflich@thefitchgroup.com
Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com

Additional information is available on www.fitchratings.com


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