Ratings for 3 Philippine Banks

(theasianbanker.com) - Standard & Poor's Ratings Services said it has raised the long-term counterparty credit ratings to 'BB-' from 'B+' on Indonesia's PT Bank Negara Indonesia (Persero) Tbk (BNI), and the Philippines' Metropolitan Bank & Trust Co. (Metrobank), Banco De Oro Universal Bank (BDO) and Equitable PCI Bank Inc. (EPCI) (see Ratings List below). The outlook is stable. At the same time, the Bank Fundamental Strength Ratings (BFSRs) of the four banks remain unchanged at 'D'.

The ratings have been raised to incorporate expected extraordinary support from the respective governments due to these banks' systemic importance in their individual countries. Standard & Poor's believes the respective governments are likely to have the willingness and capability to provide extraordinary support in the event the above banks encounter distress.

Extraordinary government support refers to specific actions-–recapitalization, liquidity support, or the purchase of problem assets-–that would prevent banks, including private sector banks, from failing. Standard & Poor's recognizes that the willingness of the governments of Indonesia and the Philippines to support systemically important banks in their systems, and defines these two governments as "interventionist." "Interventionist" is defined by Standard & Poor's as a government that is highly likely to intervene directly and rescue failing banks, compared with "supportive" and "support uncertain" governments (see "External Support Key In Rating Private Sector Banks Worldwide," published Feb. 27, 2007, on RatingsDirect).

BNI is a systemically important bank as it is the third largest with 10.5% market share in deposits and 8.4% in loans. Indonesia's PT Bank Mandiri (Persero) (BB-/Stable/B) is also a systemically important bank, in theory, qualifying for an uplift in its rating. However, Standard & Poor's does not think it appropriate that such implicit government support should raise the ratings on the bank above the foreign currency sovereign credit rating (foreign currency BB-/Stable/B; local currency BB+/Stable/B).

Metrobank in the Philippines is also systemically important as it is the largest bank with 16.4% market share in deposits and 11.4% in loans. BDO is also considered to be a systemically important bank as it will become the second-largest bank in the Philippines, after its expected merger with EPCI. On a pro forma basis, the merged market share of BDO-EPCI would be an estimated 15.8% in deposits and 12.4% in loans. Standard & Poor's expects BDO and EPCI to get the necessary approvals to complete the merger and be the second largest in the country.