Moody's Investors Service has upgraded United Coconut Planters Bank’s (UCPB) ratings after its merger with state-owned Land Bank of the Philippines (Landbank) last week.
“LBP (or Landbank) is the surviving entity absorbing all the assets and liabilities of UCPB, which has ceased to exist,” said Moody’s, adding that the outlook on UCPB's long-term deposit rating is stable. But following the merger, Moody's will subsequently withdraw all of UCPB's ratings.
The credit watcher has upgraded UCPB’s long-term deposit rating to “Baa2” from “Ba3” and its deposit note program rating to “(P)Baa2” from “(P)Ba3”. It also adjusted the bank’s Baseline Credit Assessment (BCA) to “ba1” from “b2” on March 1, which was the completion of the merger.
In explaining the ratings rationale, Moody’s said UCPB's long-term deposit ratings, program rating and adjusted BCA were upgraded “to align with those of LBP upon the completion of the merger with LBP, a much larger wholly government-owned bank with a stronger credit profile.”
Moody's said it estimates that Landbank as surviving entity “will be the second-largest bank in the Philippines” accounting for 15 percent of total banking assets as of end-2020.
Landbank in a statement on Feb. 28 said the merger will increase the bank’s assets to P2.9-trillion.
Landbank President and CEO Cecilia C. Borromeo has said that the merger of the two banks will enable the surviving entity to have the capital and resources to fund agriculture and rural development.
Executive Order No. 142, signed on June 25, 2021, ordered the merger of Landbank and UCPB for a better capitalized government bank to promote financial inclusion.
Landbank is the second largest lender in the Philippines after BDO Unibank Inc. of the SM Group.
The merger increases Landbank’s branches to 677 with 2,800 automated teller machines and 228 cash deposit machines nationwide.
Landbank said all UCPB branches will continue to operate and serve UCPB customers until the systems integration and accounts migration to Landbank are completed. However, since accounts are yet to be converted or migrated from UCPB to Landbank, existing service fees for cash withdrawals will still apply for UCPB cardholders transacting at Landbank ATMs.
The Bangko Sentral ng Pilipinas (BSP) issued a circular letter last March 2 informing the industry of the merger. BSP Deputy Governor Chuchi G. Fonacier said the Securities and Exchange Commission has approved the articles and plan of merger last Jan. 14.