Moody’s Ratings said it has affirmed the investment-grade credit ratings of three universal banks and kept their stable outlook, indicating their firm financial position and high profitability.
The credit rating agency issued three separate reports late Monday on the country’s biggest lenders and industry leaders: Banco de Oro (BDO), Bank of the Philippine Islands (BPI) and Metropolitan Bank and Trust Co (Metrobank).
The banks have adequate capital, healthy liquidity, and good profitability — all worthy of their “Baa2” credit rating, Moody’s said.
Baa2 falls under the investment-grade category, meaning it is generally considered safer-than-speculative grade ratings.
While “Baa2” is the second-lowest investment-grade rating on the Moody’s rating scale, it is still considered a safe investment compared with “Baa3.”
BDO, BPI and Metrobank are at the same level as the sovereign rating of the Philippines, “so an upgrade is unlikely, unless there is an upgrade in the sovereign rating,” Moody’s said.
Stable asset quality
The ratings affirmation of BDO reflects its stable asset quality and strong credit underwriting despite its high consumer loan growth over the past three years, Moody’s said.
“The bank’s asset quality has remained stable despite strong consumer loan growth over 2022-2024, at a three-year compounded annual growth rate of 14.5 percent, as well as continued concentration risks to large domestic corporations,” it said in the ratings report.
BDO’s problem loan ratio, or nonperforming loans (NPL) ratio, as a percentage of gross loans, remained unchanged at 1.9 percent as of end-2024, Moody’s noted.
“We expect its problem loan ratio to remain stable in 2025, with unseasoned loan risks partially mitigated by the bank’s track record of strong underwriting and its focus on consumer loan origination from its current depositor base,” it said.
“At the same time, its problem loan coverage ratio remains one of the strongest among its rated-peers at 148 percent as of end-2024,” it added.
BDO’s profitability, it said, improved to 1.77 percent in 2024 from 1.69 percent a year earlier, driven by a stable net interest margin, higher non-interest income and lower credit costs.
“In the first quarter of 2025, the bank’s reported return on assets was stable, at 1.61 percent,” compared with the year-earlier period, the agency reported.
“At the same time, we expect the bank’s credit costs to remain low, at around the current level of 40 basis points (bps), and its growth in non-interest income to continue, which will support the bank’s overall profitability,” it said.
Moody’s expects BDO’s capital ratio to remain stable at 14 percent to 15 percent in 2025 with its internal capital generation sufficient to keep up with its loan growth.
“We expect the bank’s funding and liquidity to remain its key strengths, with a robust and growing dominant franchise supporting its deposit market share, which was the highest among its domestic rated-peers as of end-2024,” Moody’s said.
Adequate capital
“The affirmation of BPI’s Baa2 long-term deposit ratings reflects the bank’s adequate capital, healthy liquidity and good profitability,” Moody’s said in a separate report.
BPI’s credit strengths, the report said, are balanced against its deteriorating asset quality, “driven by its rapid loan growth into the higher risk consumer segments.”
The problem loans ratio of BPI was largely stable at 3.1 percent as of end-2024, compared with 3 percent a year earlier, but its reported NPL ratio increased to 2.1 percent from 1.8 percent over the same period because of higher problem loans in the bank’s unsecured lending segments, such as credit cards, personal loans and microfinance.
“Its reported NPL ratio has further increased to 2.3 percent as of March 2025,” Moody’s said.
“The bank’s problem loan coverage level has also declined to 77 percent from 99 percent over the same period due to higher write-offs on its retail book,” it said.
Moody’s expects a further weakening in the bank’s asset quality as its loans mature and given the expected consequence of its goal to have double-digit growth in higher risk credit cards, personal and business bank loans.
“This would likely see BPI go down the credit curve as it seeks to increase financial inclusion,” Moody’s said.
Moody’s saw BPI’s return on assets improved to 1.91 percent in 2024, from 1.75 percent in 2023, “on the back of a higher NIM resulting from the larger share of consumer loans and low credit costs.”
BPI’s return on assets was broadly stable at around 2 percent in the first quarter of 2025, compared with the year-earlier period.
Moody’s expects its return on assets to weaken and settle at about 1.6 percent to 1.7 percent in 2025, as its modest net interest margin expansion from a larger share of higher yielding retail loans will be offset by higher credit costs while BPI grows its unsecured retail portfolio and rebuilds its loan loss buffers.
Funding and liquidity will remain strong for BPI since it relies less on market funds–estimated at around 5 percent of tangible banking assets as of end-2024–while its liquid banking assets accounted for 27 percent of tangible banking assets.
“We expect the bank’s funding and liquidity metrics to remain strong despite some deterioration as the bank accelerates growth,” Moody’s said.
Strong solvency
The affirmation of Metrobank’s ratings is a reflection of its strong solvency, balanced against weakened funding and liquidity metrics, Moody’s said.
“The bank’s strong solvency is supported by its robust asset quality and stable profitability. As of March 2025, Metrobank’s reported nonperforming loans ratio was stable at 1.6 percent, despite an increase in the delinquencies in its retail loans portfolio,” Moody’s said.
Metrobank has maintained a strong loan loss buffer. Its loan loss reserves, as a percentage of nonperforming loans, was high at 151 percent as of March 2025.
However, Moody’s noted the capitalization of Metrobank has declined over the past few years.
“As of March 2025, the bank’s Common Equity Tier 1 (CET1) ratio was at 14.7 percent, lower than 16 percent a year earlier,” it said.
“We expect the bank’s CET1 ratio to be stable at the current level as Metrobank considers a CET1 ratio of 15 percent to be sufficient for supporting its loan growth strategies,” Moody’s added.
Metrobank’s funding structure also deteriorated over the past 12 to 18 months.
“As of March 2025, market funds as a percentage of tangible banking assets increased to 21 percent from 10 percent a year earlier, as the bank used cheaper funding to support its growth,” the agency said.
“We expect the reliance on market funds to remain broadly stable at the current level. While loan growth will moderate in 2025, we expect the bank to maintain its net interest margin by funding its growth with cheaper sources of funds,” it said.
Metrobank continues to maintain a strong liquidity buffer, with a liquidity coverage ratio of 184 percent as of March 2025. “While it has declined from 276 percent a year earlier, it remains higher than some of its rated peers in the Philippines,” Moody’s said.
For now, an upgrade of Metrobank’s baseline credit assessment and ratings “is unlikely as they are already at the same level as the Philippines sovereign rating,” it added.
