With Moody’s Investors Service maintaining its sovereign credit rating at investment grade, it is likewise keeping its stable outlook on certain Philippine banks.

Outgoing Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. yesterday said Moody’s are not amending its favorable outlook on the economy – “partly on account of the price and financial stability that comes on the back of prudent monetary policies and bank supervision.”

“The banking sector, which remains strong and stable, will also continue to support the increasing potential output of the economy as it provides financing for growing investment and consumer demand,” said Tetangco.

In a separate statement, Moody’s said it has affirmed BDO Unibank, Inc.’s local and foreign currency deposit ratings of “Baa2/Prime-2”. BDO, the banking arm of the SM Group, is the country’s biggest bank.

Moody’s reported that it has also affirmed BDO’s ratings on the following: senior unsecured debt and senior unsecured MTN program ratings of Baa2 and (P)Baa2, as well as short-term MTN program rating of (P)Prime-2.

“At the same time, Moody’s has affirmed the bank’s baseline credit assessment (BCA) of baa2 and adjusted BCA of baa2. The bank’s counterparty risk assessment remains unchanged at Baa1(cr)/P-2(cr),” it said.

“Moody’s has also affirmed BDO Unibank, Inc., Hong Kong Branch’s MTN  program ratings at (P)Baa2/(P)Prime-2. The outlook on all the ratings — where applicable — is stable.”

Moody’s explained its current BDO credit grade: “The affirmation of BDO’s Baa2 deposit and senior unsecured debt rating is based on the bank’s BCA of baa2, and Moody’s expectation that there is a very high probability of the bank receiving systemic support from the Philippine government (Baa2 stable) in times of need. However, the ratings do not receive an uplift, because they are already at the same level as the sovereign’s rating.”

Moody’s added that the bank have these factors behind the steady ratings: domestically focused, prominent, and growing franchise; stable asset quality and loss absorbing buffers; sufficient capital levels that exceed the regulatory minimum; stable profitability, supported by a gradual expansion in net interest margins; and robust funding and liquidity profile.

“The BCA also incorporates the weaker aspects of BDO’s profile, including downside risks to loan quality posed by an unseasoned loan book, and high concentration in the manufacturing sector,” said Moody’s.

The credit watcher also highlighted the bank’s “high concentration to conglomerate groups” in the manufacturing sector which “could expose the bank to single name delinquencies; a latent risk in the system which affects all rated-Philippine banks.”

However it emphasized that BDO as the largest bank in the country, has strong funding and liquidity base, and it should continue to be “defensible.”

For one, it covers a market share of 22 percent and two, it has 18 percent of industry total system loan and deposits.

Moody’s sovereign credit rating was maintained at Baa2, which is a notch above the minimum investment grade, and the outlook on the rating remained “stable” for the Philippines, on account of sustainable economic growth, effective debt consolidation and a rising private sector investments.