Moody's cuts two Philippine banks

Moody's Investors Service said it downgraded the subordinated debt ratings of Rizal Commercial Banking Corp. and Philippine National Bank following a review launched on June 3 to reassess the probability of government support that was assumed for this debt class.

Moody's concluded its review by removing the support uplift previously incorporated in the banks' subordinated debt ratings, resulting in these banks' subordinated debt now being rated one notch below their baseline credit assessments adjusted for parental support.

At the same time, the agency confirmed the subordinated debt rating of Metropolitan Bank & Trust Co. This rating was placed on review for upgrade on July 25, together with the bank's deposit ratings, following the review for upgrade on the Government of the Philippines' debt ratings. The decision to the remove support uplift from this debt class means that subordinated debt ratings would now generally move in tandem with a bank's baseline credit assessments.

The three banks' senior obligation ratings and their stand-alone baseline credit assessments were not affected.

Moody's said the downgrade reflects the increasing international trend of imposing losses on holders of subordinated debt securities as a pre-condition for distressed banks to receive government support. As a consequence, the agency no longer assumes that Philippine government support would be forthcoming for the holders of such securities.

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