Standard & Poor's Ratings Services said yesterday it revised its rating outlook on Philippine National Bank (PNB) to positive from stable.
"At the same time, we affirmed our 'B+' long-term and 'B' short-term counterparty credit ratings on the bank. We also affirmed our 'axBB' long-term and 'axB' short-term Asean regional scale rating on the bank," it said.
"The outlook revision reflects gradual improvements in PNB's asset quality, underpinned by more stringent credit underwriting standards, and the bank's capital strengthening from a recent equity injection," said Standard & Poor's credit analyst Chris Lee.
The affirmed ratings reflect the bank's weak asset quality by domestic and international standards, despite recent improvements.
As of the end of September 2013, the bank's nonperforming assets (NPA, including nonperforming loans, foreclosed assets, and restructured loans) has fallen to 9.98 percent of total loans from 16.9 percent in 2011, but that level remains weaker than the industry average of 5.6 percent.
"PNB's merger with Allied Banking Corp. (Allied Bank) in February 2013 also helped PNB improve its NPA ratio because Allied Bank's loan quality was better than PNB's," said Lee.
This merger, along with a capital injection of P11.6 billion in February 2014, boosted capitalization, which may provide some buffer for the bank against bad assets.
"The positive outlook on PNB reflects our expectation that the bank's asset quality could keep improving, given the bank's effort to improve its underwriting standard.
However, PNB's pursuit of higher loan growth after its merger with Allied Bank could test the capabilities of its risk management infrastructure.
– (2014, March 19) PNB gets better rating from S&P The Daily Tribune, p. 10