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Fitch upgrades ratings of 4 Philippine banks

Fitch Ratings upgraded the long-term issuer default ratingsof China BankingCorp., PhilippineNational Bank, RizalCommercial Banking Corp. and Security Bank Corp. to BB+ from BB on theback of the country's improving economy and banking regulations.

The rating agency also upgraded to "bb+" from"bb" the Philippine banks' viability ratings. At the same time, Fitchupgraded Philippine National Bank's national long-term rating to AA-(phl) fromA+(phl).

The outlooks on the ratings are stable.

Fitch said it expects the banks' asset quality and creditprofiles to benefit from continued economic improvement and proactiveregulatory oversight. Further, the banks are likely to maintain steady assetquality, adequate capital buffers and stable funding and liquidity as they growand potentially expand their market share.

Of the four banks, Security Bank is the one likely to changeits asset mix in the medium-term due to its partnership with Bank of Tokyo-Mitsubishi UFJ Ltd. Aggressive could weaken SecurityBank's asset quality, funding and capitalization if poorly managed, accordingto Fitch. The bank currently has a nonperforming loan ratio of 0.8% at the endof 2015, the lowest among the four banks.

Fitch also affirmed the four banks' support ratings at"3" and support rating floors at BB-. The national long-term ratingsof both Security Bank and China Banking were affirmed at AA-(phl), while theshort-term foreign-currency issuer default rating of Security Bank was affirmedat B.

Given the banks' moderate systemic importance, Fitch expectsreasonable probability of extraordinary government support for the lenders intimes of stress.

The rating agency does not expect another upgrade in thenear-term. However, it could downgrade the banks' ratings if their higher riskappetites result in significant asset quality deterioration and earningsvolatility. Excessive growth in riskier and more volatile sectors could alsoadd pressure on the banks' ratings.