Global debt watcher S&P Global Ratings on Thursday raised the investment-grade score of state-run Development Bank of the Philippines to “BBB+” from “BBB” with a stable outlook, following its upgrade of the Philippines two days ago.
S&P said in a report it affirmed the bank’s short-term rating at “A-2” and raised DBP’s senior unsecured notes to “BBB+” from “BBB.”
“We raised the rating on DBP following a similar upgrade in the sovereign credit rating on the Philippines. We see an almost certain likelihood that the government of the Philippines will provide timely and sufficient extraordinary support to the bank if needed,” S&P said.
“Therefore, the issuer credit ratings on DBP are equalized with the sovereign credit rating on the Philippines,” it said. The upgrade is a notch away from “A-“ which is within the “A” category.
It said DBP plays a critical public policy role in supporting th economic and social development of the country. It also has an integral link to the government.
In its policy role, DBP assists critical industries and finances the government’s infrastructure programs by lending primarily to local government units, water districts, electricity cooperatives, other corporates, as well as micro, small and midsize enterprises.
“Our assessment of government support reflects the government’s history of capital support and sovereign guarantees for DBP’s external borrowing. The government wholly owns the bank and the president of the Philippines appoints the bank’s board of directors,” it said.
DBP was established in its current form by an executive order in 1986. The bank’s designated mandate is broadly defined as development financing. In supporting the government’s social and economic development agenda, DBP undertakes a wide range of projects that cannot be pursued on a commercial basis.
DBP is one of only two government-owned development financing agencies and is among the top 10 banks in the Philippines in terms of assets.
“Our stable outlook on DBP reflects the outlook on the sovereign credit ratings. The ratings on DBP will move in tandem with the sovereign credit ratings on the Philippines,” S&P said.
It expects DBP to remain an important instrument for the government’s medium-term development strategy, adding the would sustain its public policy role over the next two years.
“Any significant change in government policy that affects DBP’s critical role or integral link will affect the ratings on the bank, which we view as unlikely over the next two years,” S&P said.
