On Thursday, major credit rating agency Fitch raised its outlook on the Development Bank of the Philippines (DBP).
This upgrade in outlook also included that for the Land Bank of the Philippines (LBP).
From “stable,” the two government-owned financial institutions now have an outlook of “positive,” according to Fitch.
Moreover, the global debt monitor kept LBP and DBP’s issuer default ratings or IDR for the long-term at “BBB.”
These three letters indicate that economic or business factors could adversely impact the two financial firms.
Nevertheless, there is a low expectation of default for them.
In a statement, Fitch relayed that the outlook revision on DBP and LBP’s IDRs reflects the viewpoint on the Philippine leadership.
Furthermore, the credit rating agency pointed out that this amendment mirrors Fitch’s perspective of developing sovereign capability.
The global debt watcher checks whether the country’s leadership could give unique backing to the two government financial firms, if necessary.
FItch cited that their evaluation considers the systemic importance of banking institutions.
Plus, it also looks into the 100-percent state ownership nature of the government-owned lenders.
English-language print and digital daily Philippine newspaper The Philippine Star reported Fitch added that their assessment checks the extraordinary policy roles of the banks as well.
Information from the Bangko Sentral ng Pilipinas (BSP) indicates that, in terms of assets, LBP is the third-largest banking firm in the Philippines.
The BSP gathered this data as of the end of September 2019. Meanwhile, DBP landed on the eighth position in the rankings.
Aside from upgrading its outlook on the two government-owned financial institutions, Fitch had also performed a similar measure for the Philippine government.
Earlier this month, the credit rating firm revised its outlook on the government of the country from “stable” to “positive.”
Furthermore, Fitch affirmed the credit rating of the Philippines at “BBB.” This level is still one notch above the minimum investment category.
Credit ratings show the ability of a nation to be in charge of and pay back its loan obligations.
A higher grading can diminish the price of borrowing in international currencies for the government of the Philippines and Philippine private businesses.
Meanwhile, outlooks present the direction that a grading is possible to move over a time frame of one to two years.
A positive outlook demonstrates that Fitch can upgrade the rating of an economy. Otherwise, it also means that the rank of an economy could remain at its current level.
Fitch is a global credit rating company. It has offices in London and New York City.
Investors utilize the ratings of Fitch as a yardstick. Fitch informs which investments will consequently deliver a solid return and will not default.
The international debt watcher is one of the top three credit rating companies in the world, as per finance and investing education portal Investopedia.
Fitch comes along with Standard and Poor’s or S&P and Moody’s.
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