Global debt watcher Moody’s Ratings affirmed the deposit ratings of the Philippines’ largest lenders—Sy-led BDO Unibank Inc. and Ayala-led Bank of the Philippine Islands (BPI)—citing their strong profitability, solid asset quality, and ample liquidity buffers.

Both lenders maintained their Baa2/P-2 long-term and short-term foreign and local currency deposit ratings with a stable outlook.

For BDO, Moody’s affirmation reflects its standing as the country’s top lender with a “robust and dominant deposit franchise supporting its very high deposit market share,” the credit rating agency said in a rating action statement on Wednesday night, May 20.

This position allows the country’s largest lender to access lower-cost funding, evidenced by a high current and savings account (CASA) ratio of 68 percent as of late 2025.

While BDO’s problem loan ratio improved to 1.7 percent last year, Moody’s noted that credit costs climbed to 0.7 percent in the first quarter of 2026 due to “pre-emptive provisions made in light of more challenging macroeconomic conditions as well as the growing share of retail loans.”

Moody’s expects BDO’s profitability to hover around 1.4 to 1.5 percent for the remainder of the year as net interest margins (NIMs) stabilize.

BDO grew its net income by six percent to ₱87.2 billion in 2025 from ₱82 billion in 2024, marking its fifth straight year of record earnings since 2021.

Bank of the Philippine Islands (BPI) likewise saw its ratings affirmed, anchored on “strong profitability, adequate capital, healthy liquidity, and stable funding.”

However, the credit agency, in a separate rating action statement, flagged BPI’s “weakening asset quality, driven by strong growth in the higher-risk retail segments, as well as challenges in its corporate segment.”

In particular, BPI’s problem loan ratio climbed to 3.4 percent as of end-2025. In the first quarter of 2026, “several corporate loans slipped into problem loans due to challenges unrelated to the conflict in the Middle East.”

Despite these headwinds, BPI’s return on assets (ROA) remained resilient at 1.83 percent, and Moody’s anticipates that its NIMs will continue expanding alongside its retail portfolio.

BPI saw its net income climb seven percent year-on-year to ₱66.6 billion in 2025, fueled by record revenues that offset rising operating costs.

Moody’s noted similar structural risks for both BDO and BPI, saying that “the banks’ high concentration on large corporate loans and long-dated investment securities will also pose risks to their asset quality.”

Both lenders are also facing pressure on their capital buffers as losses from securities investments reduced their core capital ratios following a sharp increase in government bond yields, especially for long-term debt papers.

Neither bank received an additional “uplift” from potential government support. Moody’s explained that this is because both BDO and BPI already hold a baseline credit assessment (BCA) of baa2, which is “already at the same level as the sovereign rating” of the Philippines.

A stable outlook indicates that credit strengths and risks are expected to remain balanced over the next 12 to 18 months. - Derco Rosal