Kathmandu, September 19
ICRA Nepal, the first credit rating agency of the country and a subsidiary of ICRA Ltd of India, has assigned an issuer rating of [ICRANP-IR] AAA to Standard Chartered Bank Nepal Ltd (SCBNL).
The rating is considered to have the highest degree of safety regarding timely servicing of financial obligations. Such issuers carry the lowest credit risk.
The rating assignment factors in the bank’s strong parentage (70 per cent
subsidiary of Standard Chartered Group) along with the existence of a technical services agreement (TSA) with SCB-UK, as per a media release.
The rating is further supported by the bank’s healthy deposit profile with high share of low-cost current and savings accounts. This reflects the lowest cost of funds among private sector players.
ICRA Nepal also takes comfort from the bank’s strong risk management practices and underwriting controls, resulting in superior asset quality indicators with low non-performing loans (NPLs) of 0.15 per cent as of mid-July, 2019. The bank’s established track record (since 1987) and healthy capitalisation profile also support the rating action, release states.
The rating also remains comforted by the bank’s healthy profitability indicators with the return on assets (RoA) and a return on net worth (RoNW) of 2.83 per cent and 17 per cent for fiscal 2019. The bank’s experienced senior management team, adequate capitalisation and its strong digitisation agendas remain positives for growth over the medium term, despite limited franchise (12 branches).
ICRA Nepal notes that the bank’s deposit and credit concentration remain high (35 per cent and 30 per cent among top 20 customers as on mid-July, 2019). However, these concerns are mitigated to an extent, considering its long-standing relationship with these clients and the pioneer position of most of the top borrowers in their respective segments. Additionally, the bank’s overall credit portfolio mix remains diversified with 55 per cent retail/SME loans, whose share has further
increased in the recent periods and hence remains a positive.
Going forward, the bank’s ability to grow its portfolio judiciously, amid current liquidity constraints in the industry, while maintaining its deposits, asset quality
and overall financial profile would remain the key rating drivers.
On the asset quality front, the bank has been consistently reporting one of the lowest NPLs in the industry, with a further improvement in recent years to 0.15 per cent as of mid-July 2019, against industry average of 1.40 per cent.
The bank fares strong on the deposit front with high share of stable/low-cost CASA deposits (55 per cent as of mid-July 2019 against 43 per cent for industry). As for capitalisation, SCBNL reported a CRAR of 19.90 per cent and a tier I capital of 18.52 per cent as of mid-July 2019 (both as per Basel III), much comfortable compared to the regulatory minimum of 11 per cent and 8.5 per cent, respectively (both including capital conservation buffer of 2.5 per cent).
The issuer rating is only an opinion on the general creditworthiness of the
rated entity and not specific to a particular debt instrument, the release adds.
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Written by Ankit Khadgi
This news first appeared on https://thehimalayantimes.com/business/stanchart-assigned-issuer-rating-of-icranp-ir-aaa/ under the title “StanChart assigned issuer rating of [ICRANP-IR] AAA”. Bolchha Nepal is not responsible or affiliated towards the opinion expressed in this news article.