Fitch raises viability ratings of Philippine banks on strong economy

Fitch Ratings has upgraded the viability ratings of several Philippine banks, citing enhanced financial performance supported by the country’s resilient economic growth and favorable interest rate environment.

In a statement, the global credit rating agency said it expects the Philippines to sustain a 6 percent gross domestic product (GDP) growth rate in the medium term, creating a strong foundation for banks to expand business volumes and limit credit risks.

Among the top beneficiaries of this economic momentum are BDO Unibank Inc., Bank of the Philippine Islands (BPI), and Metropolitan Bank & Trust Company (Metrobank), all of which carry long-term issuer default ratings (IDRs) of “BBB-/Stable.” Fitch noted that the three banks have seen profitability exceed pre-pandemic levels and are expected to maintain those gains over the next 12 to 18 months.

“These banks benefit from strong franchises and prudent underwriting practices that support loan quality, especially as they grow their retail lending,” Fitch said.

The viability ratings are used to assess a bank’s intrinsic financial strength, and are a key driver of their long-term IDRs.

Fitch also observed improvements in the credit profiles of state-owned Land Bank of the Philippines and Development Bank of the Philippines (DBP), both rated “BBB/Stable.” While past policy lending has weighed on their asset quality, the agency noted that capital buffers are gradually recovering and outlooks are improving.

“Impairment charges are expected to ease in the coming year, which will help lift profitability and support capital accumulation,” the agency said.

However, Fitch emphasized that the IDRs of Land Bank and DBP are still underpinned by their government support ratings, reflecting the state’s willingness and capacity to provide financial assistance if needed.

Overall, the upgraded ratings reflect growing confidence in the Philippine banking sector's ability to weather external pressures and sustain profitability amid an improving macroeconomic backdrop.