Kathmandu. Credit rating agency ICRA Nepal has reaffirmed standard chartered bank Nepal’s issuer rating ‘Triple A’.
It is the first and the only commercial bank in Nepal to receive ‘Triple A’ rating. The bank from ICRA Nepal has been receiving this rating {{TAG_OPEN_span_41 TAG_CLOSE_span_41}} for 6 consecutive years.
Issuer ratings are a useful basis for new investors and existing investors to decide how safe their investment is in the shares of companies traded in the securities market.
According to ICRA Nepal, such a rating indicates a high guarantee that the company will meet its entire financial liability within the stipulated time. The risk of debt or debt sinking by such a company is also very negligible.
fiscal year 2081. Valuation reconfirmation factors are the bank’s sustainable strong capitalization profile of capital-risk weighted asset ratio (CRAR) of 17.44% and Tier-1 capital of 15.15% as of Mid-April 2018. The regulatory ratios in both of these are respectively, compared to a minimum of 11% and 8.5%, respectively.
Low non-performing loans:
For this assessment, the bank’s strong asset quality has also helped with the total non-performing loans of 1.44% as of mid-April last year. The average non-performing loan ratio of commercial banks is much lower than 5.05%.
Apart from this, the number of borrowers repaying the loan late than the repayment of the principal interest on the loan is limited to 4 percent. This has also given relief to the bank.
The bank’s competitiveness in terms of tight underwriting standards, strong risk management practices and ability to provide better lending rates has kept the bank comfortable with increasing asset quality.
cheap deposits and global brands:
The bank’s healthy deposit profile, with a relatively high share of low-cost deposits, has helped maintain the minimum cost of funds in the industry, which has become one of its strengths. The valuation shows that the bank is in a strong competitive position due to its globally reputed brand and being the preferred banking partner for many multinational companies present in Nepal.
More dependencies on limited borrowers:
Despite the bank’s strengths, the high dependency on the top 20 lending groups, which account for 41 per cent of the total debt, points to the risk of concentration. ICRA Nepal has also said that although the group of borrowers is limited, they are relatively comfortable as they are the leading industry business in their area.
Any unforeseen regulatory changes and unstable political, operating environment can affect borrowers’ borrowing and lending.
Effect of fine:
The rating agency has also taken note of the recent fine imposed by The Nepal Rastra Bank (NRB) for not mobilizing loans in a specified sector. During the monitoring of the third quarter of the current fiscal year, the Rastra Bank had imposed a fine of Rs 148.525 million on Standard Chartered Bank. ICRA Nepal said that the amount of this one-time penalty was modest compared to the bank’s asset base/annual profit, and its impact has been included in the financial transactions up to the third quarter.
Terms of rating continuity:
Commenting on the continuation of the issuer rating, ICRA Nepal said, “In the future, the bank’s ability to maintain easy capitalization and good asset quality indicators will remain key monitorable. ”
Standard Chartered Bank is a foreign investment bank. The valuation reconfirmation has taken the bank’s long track record (since 1987) and its strong guardianship (a 70% owned subsidiary of Standard Chartered Group 1) as well as the group’s supervisory support as key factors.
