Moody’s affirms UnionBank’s credit rating

MOODY’S INVESTORS Service has affirmed its investment grade rating UnionBank of the Philippines, Inc., citing the bank’s robust capitalization and large pool of liquid assets.

In a statement on Thursday, the credit rater said they have affirmed UnionBank’s long-term local and foreign currency issue ratings of Baa2, a notch above the minimum investment grade and at par with the country’s credit rating.

Likewise, Moody’s said it has also affirmed the lender’s foreign currency senior unsecured rating of Baa2, foreign currency senior unsecured medium-term note (MTN) program rating of (P)Baa2, as well as Baseline Credit Assessment (BCA) and adjusted BCA of baa3.

In its assessment, Moody’s considered that the bank will have support from the government in times of need.

“The support assumption is predicated on UnionBank’s moderate market share in terms of deposits, which stood at around 3% as of Sept. 30, 2019,” Moody’s said.

Meanwhile, the affirmation of UnionBank’s BCA is on the back of the lender’s strong capitalization and large pool of liquid assets, Moody’s said.

“The BCA also incorporates the bank’s reliance on high-cost, confidence-sensitive time deposits for funding, as well as the rising asset risks associated with the bank’s growing retail franchise,” it added.

Moody’s noted that the Aboitiz-led lender has been banking on growing its “higher-yielding but riskier” loans disbursed to small and medium enterprises. This move is expected to lead to a gradual shift in the asset mix of the bank towards riskier assets in the next 12-18 months, it said.

The bank’s net profit hit P8.5 billion in January to September 2019, a 40% year-on-year jump from the comparable 2018 period.

UnionBank’s shares closed at P59.80 apiece on Friday, up by 1.18% or 70 centavos from its previous close. — LWTN