BDO Leasing’s P15-B STCP Rated

24 November 2012

Philippine Rating Services Corporation has assigned a PRS 2 minus rating to BDO Leasing & Finance, Inc.'s (BDO Leasing) P15.0 billion short-term commercial papers (STCPs).

A short-term issue rating of PRS 2 is defined as "above average (strong) capability for payment of commercial paper issue on both interest and principal. This is normally evidenced by many characteristics of a PRS 1 rating but to a lesser degree."

It also means that "earnings trends and coverage ratios, while sound, will be subject to variations. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained."

In arriving at the rating, PhilRatings considered BDO Leasing's solid market position and business synergy with its parent company, BDO Unibank, Inc. (BDO); its expanding loan portfolio which offsets margin compression; improved asset quality, as well as sufficient capitalization.

However, PhilRatings also sees the need for BDO Leasing to still achieve steady significant growth in net profit moving forward.

BDO Leasing is a significant player in the Philippine financing industry. It continues to benefit from synergies, name recognition and marketing referrals provided by the BDO Group.

BDO Leasing aims to offset net interest differential compression through continuous volume expansion and efficient asset management.

For the first half of 2012, the company managed to keep margins relatively stable and unchanged from end-2011, although still lower than those registered in previous years.

Lower interest differential was due to the decline in both lending and borrowing rates; increased lending to corporate accounts; and keener competition from other industry players, including banks.

Countering this, however, are revenue contributions from the company's expanding lease and finance portfolio. BDO Leasing's growing asset base is expected to result in improved profitability in the coming years.

In addition to the substantial growth in receivables, the company's continuous efforts to control its non-performing assets (NPA) also resulted in improved asset quality measures.

Such improvement can be attributed to the company's stringent risk management governance, credit policies and procedures, continuous monitoring of accounts, as well as adequate provision for loan and impairment losses.