Fitch Ratings has revised the credit outlook for the Land Bank of the Philippines (Land Bank) and the Development Bank of the Philippines (DBP) to "negative" from "stable," following its recent downgrade of the Philippines' sovereign credit rating. The action reflects the close linkage between the two state-owned banks and the government, given their policy roles and ownership.
According to Fitch, the negative outlook mirrors that of the sovereign, indicating that any further downgrade of the Philippines' credit rating could lead to a similar action on the banks. The rating agency affirmed the banks' Long-Term Issuer Default Ratings (IDRs) at 'BBB' for Land Bank and 'BBB-' for DBP.
Fitch noted that both banks have strong credit profiles, supported by their public policy mandates and solid capitalization. However, their ratings are constrained by the sovereign rating, as they are ultimately owned by the government and their financial health is tied to the state's ability to provide support if needed.
The revision comes amid concerns over the Philippines' fiscal position and economic recovery prospects. The sovereign downgrade was driven by the pandemic's impact on public finances and a slower-than-expected rebound.
Land Bank and DBP play crucial roles in financing agricultural development and infrastructure projects, respectively. The negative outlook signals potential risks to their creditworthiness if the sovereign's situation deteriorates further.