Philippine National Bank (PNB) received a higher Moody’s rating for both long-term foreign and local currency deposits at Baa2 rating from Baa3, emphasizing the bank’s strong capitalization efforts.

Moody’s also raised the bank’s foreign currency (FC) senior unsecured rating to Baa2 from Baa3 and its FC senior unsecured medium-term note program rating to (P)Baa2 from (P)Baa3.

“The upgrade is driven by PNB’s sustained improvement in core profitability, robust capital and solid liquidity, which will provide sufficient buffers against the bank’s modest asset quality,” Moody’s said in a report released Tuesday.

Profitability growth seen

Moody’s expects PNB to slightly improve its profitability to 1.8 percent this year due to moderate lending costs and manageable expense for depositors.

PNB posted a 1.7 percent growth in return on assets last year from an average of 0.9 percent based on data from the years 2019 to 2023.

Moody’s said PNB will likely continue to mobilize funds from remittances service and receivables from collateralized loans and high-paying loans.

“Profitability will reflect the bank’s large proportion of loans with higher rates fixed for three to five years and growth of higher yielding retail, small and medium enterprise-sized and commercial loans,” the global credit rater said.

“Seasoning risks from the aggressive growth of its retail loans are partially mitigated by the fact the bank largely targets borrowers who are within its ecosystem and bulk of the growth will stem from the secured auto and mortgage loans, reducing risk of credit cost spikes,” Moody’s added.

Moody’s also said PNB will likely minimize liabilities to depositors as it processes mostly current and savings accounts offering lower savings rate.