Moody’s maintains PNB’s stable and positive outlooks

Moody’s Investors Service maintained all its ratings on Philippine National Bank.

The bank is the surviving entity following its merger with Allied Banking Corporation.

In a statement, Moody’s has affirmed its stable outlook on PNB’s local and foreign currency deposit of Ba2 and its subordinated debt rating of Ba3, while at the same time keeping a positive outlook on the lender’s standalone bank financial strength rating (BFSR) of E+, which maps to a baseline credit assessment of b1.

“The positive outlook on the bank’s standalone credit standing reflects Moody’s expectations of improvements in PNB’s financial performance, in particular with regards to cost efficiency and asset quality, which will likely bring its credit profile closer to the industry average within one to two years,” the credit rating agency said.

Nonetheless, Moody’s said the stable outlook on PNB’s long-term ratings signals that its deposit and subordinated ratings are unlikely to be upgraded in the short-term, even if the BFSR were to be upgraded.

Moody’s estimates that post-merger, PNB’s share of system deposits is 7 percent and its share of system loans is 6 percent. By contrast, its share of system deposits and loans pre-merger was about 4 percent.

While PNB’s systemic importance has increased, Moody’s said its larger share of system deposits and loans is insufficient to result in an upgrade of its long-term rating unless the bank’s BFSR is upgraded by two notches, all other assumptions remaining equal.

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