Planters Development Bank’s (Plantersbank) P1 billion in unsecured subordinated notes gets a PRS A rating, according to PhilRatings, the country’s pioneer domestic credit rating agency. The PRS A rating means that: “…an issue has favorable investment attributes and is considered as an upper-medium grade obligation. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.”
Plantersbank’s Tier-2 Issue has a term of ten years, with a call option after year 5. The issue involves a peso tranche, amounting to P536 million and a dollar tranche, equivalent to about USD 8.4 million.
PhilRatings assigned the PRS A rating to the Tier-2 issue based on Plantersbank’s strong market position in its chosen niche, that of serving and concentrating on the SME sector; its satisfactory funding profile given the improving level of customer deposits and its ready access to wholesale (program) funds; and strategic benefits derived from its active partnership with solid international financial institutions, namely: International Finance Corporation (IFC), Netherlands Development Finance Company (FMO), and Asian Development Bank (ADB). These three institutions have a combined 36.3% ownership stake in the bank, and are all rated AAA by Standard & Poor’s on the global scale.
The rating likewise takes into consideration the bank’s profitability and asset quality. For 2004, unaudited net income amounted to P400.7 million, representing a return on average equity (ROAE) of 18.9% and a return on average assets (ROAA) of 1.3%. The bank’s cost-to-income ratio was at 62.8% while its non-performing assets (NPA) ratio was at 24% as of end-2004. Plantersbank’s NPA ratio is expected to improve further going forward as it takes steps to reduce its non-performing loans and ROPOA and this includes looking at the possible sale of a significant amount of ROPOA to a special purpose vehicle (SPV) over the short-term. Details and terms of this transaction are forecasted to be available before the end of the first semester of 2005 and PhilRatings shall monitor developments in this area closely.
With the Tier-2 capital note issue, Plantersbank’s capitalization ratio stood at 17.5% as of end-2004 compared to the Bangko Sentral ng Pilipinas’ (BSP) required 10%. The Tier-2 issue will allow the bank to access a higher amount of facilities from its wholesale funding institutions, thereby enhancing future business growth. Going forward, Plantersbank intends to continue expanding its earning asset base, accelerate deposit growth, as well as achieve greater operating efficiency, while still keeping its focus on the SME market. Some of its recent product introductions are: SME Proposition, an integrated cash management service bundled with web-based business solutions; Mortgage Optimizer, a multipurpose loan combination facility; and Handy Credit, a personal loan product for employees, businessmen, and professionals.