UMVA has learned that a top credit ratings agency has reaffirmed its confidence in two of the Philippines' major banks, citing their strong financial performance and robust deposit bases.
The agency has affirmed the long- and short-term ratings and outlooks for BDO Unibank, Inc. and Bank of the Philippine Islands (BPI), two of the country's largest lenders. This move is a significant vote of confidence in the banks' ability to weather economic challenges.
The affirmed ratings reflect the banks' solid financial foundations, with BDO boasting strong asset quality, funding, and liquidity. The bank's dominant deposit franchise and high current and savings account deposit ratio of 68% as of end-2025 are key strengths.
BDO's nonperforming loan (NPL) ratio is expected to remain stable, supported by write-offs on its fast-growing unsecured retail loans. However, credit costs may stay elevated due to the surge in consumer loans and preemptive provisioning amid challenging macroeconomic conditions.
The agency expects BDO's return on assets (RoA) to range from 1.4% to 1.5% this year, with net interest margin (NIM) stabilizing despite elevated credit costs and operating expenses. Capitalization will remain adequate, although capital generation may grow slower as credit demand eases.
Meanwhile, BPI's credit strengths include strong profitability, adequate capital, healthy liquidity, and stable funding supported by its solid deposit franchise. However, the bank's loan quality has weakened as it expands its higher-risk retail lending businesses.
The agency expects BPI's retail segments to experience further strain in 2026 due to shrinking financial buffers of retail borrowers amid higher inflation. Although the bank has tightened credit underwriting, asset risks are expected to remain elevated, with credit costs normalizing closer to the 0.9% range in 2026.
Both banks' ratings will depend largely on the movement of the Philippines' sovereign rating, which could impact their deposit ratings. A significant deterioration in asset quality or increased risks from related party lending could lead to a downgrade.
The affirmation of these ratings is a welcome boost for the two banks, which will likely continue to play a crucial role in the Philippines' financial landscape. Their strong financial positions will enable them to navigate the challenges ahead and capitalize on emerging opportunities.
