MANILA, Philippines — Pointing to resilient domestic deposit networks and robust capital safety nets that can absorb broader macroeconomic shocks, a major global debt watcher has given the country’s top lenders a clean bill of health. In separate credit actions issued on Wednesday, May 20, 2026, Moody’s Ratings officially affirmed the investment-grade credit ratings and stable outlooks of Bank of the Philippine Islands (BPI) and BDO Unibank Inc. (BDO).
However, the international credit assessment firm packaged its affirmations with a stark warning: both banking giants must brace for significantly higher credit costs as they build up emergency provisions against a localized deterioration in loan quality stemming from the Middle East war fallout.
The debt watcher maintained its long-term local and foreign currency deposit ratings for both institutions at Baa2, matching the sovereign credit rating of the Philippine national government.
The accompanying “stable” outlook signals that Moody’s expects no downward rating adjustments over the next 12 to 24 months, despite intensifying microeconomic headwinds.
[Baa2 INVESTMENT RATING MAINTAINED] ──► Stable Outlook Across Next 12 to 24 Months
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▼ (The Balancing Act)
[Credit Provisions Rise to 0.9% Range] ◄── Offsets Higher Inflation & Corporate Risks ◄── [Solid Deposit Franchises]
For BPI, Moody’s noted that the investment-grade validation is firmly anchored by the institution’s high-margin profitability, healthy cash positions, and a dominant, low-cost domestic deposit franchise.
However, the bank’s aggressive expansion into consumer debt is beginning to create friction:
[ BPI CREDIT RISK PORTFOLIO ]
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▼ ▼
[ CONSUMER ASSET STRAIN ] [ THE NORMALIZATION PATH ]
• Rapid credit growth in high-yield, higher-risk retail segments • Moody's expects asset risks to remain highly elevated
is under pressure from shrinking household savings buffers. through the rest of 2026 as local inflation bites.
• Compounded by concentrated corporate exposure and an • Credit costs are projected to normalize closer to the
accumulation of long-dated investment securities. **0.9 percent range** as write-offs expand.
Management has already adjusted its credit underwriting guidelines, implementing tighter screening matrices and planning to moderate its consumer lending expansion to insulate the balance sheet from broader default cycles.
BDO’s credit rating profile continues to be supported by its absolute market dominance in the local banking sector. The bank’s massive footprint secures an elite share of low-cost funding, with current and savings accounts (CASA) representing a staggering 68 percent of its total deposit base as of the end of December 2025.
[ BDO RISK ABSORPTION ANALYSIS ]
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[ PROBLEM LOAN STABILITY ] [ PROACTIVE WRITE-OFFS ] [ CONCENTRATION TRAPS ]
Moody's expects BDO's bad-loan Asset performance will be actively Like its peer, BDO remains exposed
ratio to remain largely flat and stabilized by aggressive write-offs to large single-borrower concentrations
manageable throughout 2026. on unsecured retail credit cards. within its major corporate books.
By aggressively cleansing its books of soured unsecured retail debts, BDO is positioning itself to maintain a stable non-performing loan (NPL) index.
Ultimately, Moody’s concluded that while the Middle East conflict continues to cloud the global economic outlook, the fortress-like capital adequacy ratios and sticky, low-cost deposit pools maintained by both BPI and BDO provide a robust structural shield, ensuring the local financial system remains fully capable of supporting broader domestic commercial activity without risking credit downgrades.
