Oct 2008 Financial News

Standard & Poor's revises National Commercial Bank rating

Oct 02, 2008

The world's leading rating agency, Standard & Poor's (S&P), has revised its rating of Jamaica's second largest commercial bank, National Commercial Bank (NCB), from 'stable' to 'negative', even as it commended the bank for creditable performances in successive quarters in a challenging economy.

"S&P revised its outlook on NCB to negative from stable; the counter-party credit ratings were affirmed at B/B," S&P's credit analyst Leonardo Bravo said yesterday. "The outlook revision reflects our opinion that, although the bank's performance continues to be adequate for the current 'B' rating, there are important economic and liquidity pressures from both local and global markets that could have an impact upon the bank's finances over the next 12 months."

Added Bravo: "We believe that the bank faces a less benign operational environment, with compressing margins, various exposures to the weaker pricing of Jamaican sovereign bonds, tighter liquidity in the international markets, and high inflation. Margins will be constrained by the increases in international interest rates. As a consequence of tighter liquidity in global markets, we think that availability of US dollars to NCB from correspondent banks could be more limited."

The rating revision comes amidst the meltdown of the US financial system which will likely prod US banks to place a premium on liquidity, making it more difficult for Jamaican financial institutions to readily access US dollars.

Reacting to the revision, NCB's Managing Director Patrick Hylton said: "It has to be made clear that this is in no way a downgrade, but rather a revision. What it basically says is that with the risks in the external environment, there will be reduced prospects for US liquidity resulting in spreads tightening."

Added Hylton: "On the local front, both inflation and interest rates continue to rise, and this will have an impact on all financial institutions, not just NCB."


Source:
Al Edwards
Jamaica Observer
Wednesday October 1, 2008

http://www.jamaicaobserver.com/news/html/20081001T000000-0500_140812_OBS_STANDARD___POOR_S_REVISES_NATIONAL_COMMERCIAL_BANK_RATING.asp