Landbank, DBP IPO seen as a good move

MANILA, Philippines An initial public offering (IPO) will be credit positive for the Land Bank of the Philippines (Landbank) and the Development Bank of the Philippines (DBP), according to Fitch Ratings.

But Global Credit Watch said in an emailed response to questions from the Inquirer that the Philippine government must retain a controlling stake in the two banks if the shares are sold.

“IPOs can significantly improve a bank's capital position and may have a positive impact on its standalone credit profile,” Fitch Ratings said.

Finance Minister Ralph Recto said last week that the government was “exploring” changes to the charters of the Land Bank and DBP, including possible public listings “to expand local capital markets”.

read: IPO expected to strengthen Land Bank and DBP

Landbank and DBP currently hold AAA credit ratings from Fitch, in line with the Philippine government's investment grade rating. While IPOs will provide banks with another option to raise capital, Fitch explained that the creditworthiness of land banks and development banks remains dependent on the support they receive from the government.

Fitch said the stock market debut “will not lift its support-driven rating” nonetheless.

“Our assessment of government support is based on the policy roles of the two banks and the state's ownership of them,” the agency said.

It added: “Any stake sale that takes the state's ownership in the banks below 50% may call into question the state's commitment to the long-term role of both banks, although this is not our current expectation.” Inquire

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