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Fitch upgrades NCBJ outlook

Published:Friday 12:51 AM

NCB branch in Portmore.

Fitch rating agency has revised the outlook for National Commercial Bank Jamaica Limited, NCBJ, from stable to positive, reflecting an overall improvement in the economy.

NCBJ is Jamaica’s largest commercial bank with assets of nearly $886 billion, in a sector with eight banks that oversee $2.25 trillion in assets, central bank industry data to December shows.

Fitch also maintained a ‘B+’ rating for the bank’s long-term debt.

“The outlook revision on Jamaica’s operating environment score to positive reflects Fitch’s assessment of the country’s post-pandemic economic recovery,” the agency said.

Jamaica’s real economic growth should total 2.3 per cent in 2023 and 2.0 per cent in 2024, it said. Thereafter, Fitch expects growth to return to the 30-year average of 1.0 to 2.0 per cent.

“The economy has recovered from the deep recession in 2020, while inflation is expected to improve and unemployment will remain below its 2020 peak,” said Fitch. “Expect this recovery to benefit the bank’s financial performance,” it said.

Fitch, however, made note of NCBJ’s declining capital-to-asset ratio, which was down to 9.8 per cent for financial year ending 2022 from 12.8 per cent the previous year, reflecting unrealised losses on investment holdings due to interest rate movements.

However, the bank’s “earnings generation and expectations for a sharp reduction of unrealised losses will underpin a recovery in capitalisation over the rating horizon”, the rating agency added.

It also noted an improvement in NCBJ’s loans book, with non-performing loans falling to 3.3 per cent of the portfolio from 4.0 per cent, saying it was “mainly reflecting more conservative underwriting standards for consumer loans in a high-inflation environment and the improvement in collection practices”.

NCBJ’s ratings were influenced by Jamaica’s sovereign rating and broader operating environment considerations.

“The bank’s business profile also weighs on the viability rating due to its strong local competitive position as the largest bank in Jamaica with a consolidated market share by assets of 39 per cent and deposits of 33 per cent at December 2022,” said Fitch.

NCBJ also controls 39 per cent of the loan market in the commercial banking sector.

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