Aug 2010 Financial News

NCB's rating up a notch

Aug 11, 2010

Pointing to Jamaica's improved economic environment and the bank's strong position in the domestic market, the regional rating agency, CariCRIS, has upgraded a notch, its rating on a notional US$75 million debt issue by National Commercial Bank (NCB).

With the CariCRIS upgrade NCB's foreign-currency rating on the agency's regional scale, moves to CariBBB from CariBBB-, while on a local basis the rate goes to CariBBB+, from CariBBB.

On the Jamaica national scale rating, CariCRIS maintained NCB's rating at jmAA-, from its previous grading in August 2009.

There is no sign that NCB has immediate plans to raise debt, but CariCRIS' action will nonetheless be reassuring to the bank's owner Michael Lee Chin and his managers, who were indirectly hailed for maintaining the bank's stability and improving its performance in difficult circumstances.

While highlighting Jamaica's enhanced macroeconomic stability since the government rescheduled over $702 billion of domestic debt at lower rates and longer maturities, CariCRIS commented: "The ratings of National Commercial Bank Jamaica (NCBJ) reflect the bank's strong market position in Jamaica as well as its good asset quality and provisioning. The ratings are supported by the group's comfortable capitalisation levels, high profitability and good diversity in earnings."

The agency, however, warned that its ratings were tempered by NCB's exclusive operations "in an economy characterised by high indebtedness and limited financial flexibility", with high funding costs and ... scope for improvement in risk management".

However, NCB, CariCRIS (Caribbean Information and Credit Rating Services) noted, largely outperformed its Jamaican peers in risk management over the past year.

In March, its non-performing loans had moved to 3.3 per cent of its total loan portfolio, from 2.6 per cent a year earlier. On the other hand, the industry average for non-performing loans was 5.1 per cent, against 2.88 per cent, in March 2009.

Additionally, the regional rating agency said NCB continued to grow revenue and profit in the first half of this year.

Commenting on the events surrounding the the government's debt restructuring scheme and Jamaica's return to a borrowing relationship with the International Monetary Fund, CariCRIS said that the fiscal discipline that is likely to arise from these measures is expected to improve and strengthen Jamaica's future fiscal position and macreconomic framework. The rating of NCBJ, said CariCRIS, was also supported by the group's comfortable capitalisation levels, high profitability and good diversity in earnings, but tempered by operations in an economy characterised by high indebtedness and limited financial flexibility, its high funding costs.

NCB Capital Markets

At the same time, NCBJ's wealth and asset management arm, NCB Capital Markets was also given improved rating levels reflecting the company's robust capital adequacy levels, its favourable market position being the second largest securities dealer in the Jamaican market, and its extensive geographic coverage.

On its US$25-million notional debt issue, NCB Capital Markets was given a rating of CariBBB- moving from CariBB+ for foreign-currency rating and CariBBB from CariBBB- for local currency.

Like its parent company, NCB Capital Markets rating of jmA+ on the Jamaican national scale also remained unchanged.

Along with two other companies both NCBJ and NCB Capital were placed under rating watch in January, following the government's announcement of the Jamaica Debt Exchange. The companies were subsequently removed in June, now to be given an upgrade in its rating status.


Source:
Sabrina Gordon, Business Reporter
sabrina.gordon@gleanerjm.com
Jamaica Gleaner
Wednesday August 11, 2010

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