Published: Friday November 21, 2008
National Commercial Bank (NCB) has fallen victim to Fitch's downgrade of Jamaica's sovereign rating.
The bank's issuer default rating has also been cut from B+ to B, in line with Jamaica's, consistent with the policy of international ratings agency whereby companies cannot be rated higher than the countries in which they are domiciled.
Fitch highlighted NCB's exposure to government as a factor in its decision to bring the bank in line with the creditworthiness of the sovereign.
Positive qualities highlighted
But NCB in a statement Wednesday acknowledging the downgrade stressed that its "strong domestic franchise, adequate profitability, good asset quality and capital levels" were also highlighted by Fitch.
The Patrick Hylton-led banking group, Jamaica's largest by assets, but No. 2 in deposits and the loans market, has just reported another record year of profits of $8.7 billion, up 32 per cent.
Net earnings would have been even more fulsome were it not for a writedown of $1.2 billion reported by its investment arm, NCB Capital Markets Limited, relating to downturns in the bond market and global financial system.
"The revision in rating was not surprising given Fitch's recent announcement on Jamaica and in light of the global economic challenges being experienced at this time." said NCB group managing director Hylton.
"However, we are very confident that the measures that we have adopted for several months now to deal with the market conditions being experienced are more than adequate to maintain our strong performance."
The ratings agency has maintained its 'BBB-' rating on Jamaica Diversified Payments Rights Company, which represents future remittance flows that have been securitised by the bank, which NCB said is Fitch's recognition that the bank can survive future economic stresses.
The Bank of Jamaica also reaffirmed this week that the financial system was "adequately capitalised".
Source: Jamaica Gleaner