ICRA Nepal assigns issuer rating of BBB to NCC Bank and LBBB to its debentures worth Rs 3 arba

ICRA Nepal has assigned a rating of [ICRANP-IR] BBB (pronounced ICRA NP issuer rating triple B) to Nepal Credit and Commerce Bank Limited (NCC), indicating a moderate degree of safety regarding the timely servicing of financial obligations. Such issuers carry a moderate credit risk. The rating is only an opinion on the general creditworthiness of the rated entity and is not specific to any debt instrument. 

ICRA Nepal has also assigned a rating of [ICRANP] LBBB (pronounced ICRA NP long-term debt rating triple B) to NCC’s proposed subordinated^[1] debenture programme worth NPR 3,000 million. Instruments with this rating are considered to have a moderate degree of safety regarding the timely servicing of the financial obligations. Such instruments carry moderate credit risk. 

Strengths

• Long track record, adequate presence and diversified credit portfolio
• Strong capitalisation and solvency profile
• Adequate profitability despite lower economies of scale, supported by provision writeback through NPA recoveries/upgradation

Challenges

• NPLs and credit cost could rise amid high interest rate scenario
• Changing regulatory landscape could affect growth and economies of scale
• Concentrated deposit profile, with CASA lagging industry average, and high cost of deposits

Bank profile

Nepal Credit & Commerce Bank Ltd. (NCC), formerly registered as Nepal - Bank of Ceylon Ltd. (NBOC), commenced operations on October 14, 1996 as a joint venture with Bank of Ceylon, Sri Lanka. The bank’s name was changed to Nepal Credit and Commerce Bank Limited (NCC) on September 10, 2002, after the transfer of shares and management to Nepalese promoters. The head office/corporate office is at Bagbazar, Kathmandu.

NCC merged with four regional BFIs3 to increase its paid-up capital, in line with the revised requirement. Combined operations commenced on January 1, 2017 after the merger. The bank’s NPA level rose immediately after the merger because of the inclusion of stressed accounts from the merging BFIs. However, the NPA level has improved since then because of recoveries/upgradation. The bank’s shares are listed on the Nepal Stock Exchange and its market capitalisation was ~NPR 17.8 billion as of January 16, 2020.  As of mid-October 2019, major shareholders of NCC includes Citizen Investment Trust (~4%), Nepal Securities & Investment P. Ltd (~2.5%), Shangrila Investment (~2.2%), NB Group (~2.1%) and Nepal Insurance Company Limited (~2%) among others.   

As of mid-October 2019, NCC had a presence across the country through 120 branches and 62 ATMs. It had a market share of 2.11% in terms of deposit base and 2.22% of the total advances in the banking industry of Nepal as of midOctober 2019. NCC reported a profit after tax (PAT) of NPR 1,021 million in FY2019 on an asset base of NPR 88,719 million as of mid-July 2019 vs. PAT of NPR 1,342 million in FY2018 on an asset base of NPR 73,461 million as of mid-July 2018. In Q1 FY2020, NCC reported PAT of NPR 467 million on an asset base of NPR 87,994 million. As of mid-October 2020, NCC’s CRAR was 13.20% (14.30% as of July 2019) and gross NPL was 2.86% (2.78% as of July 2019). 

Summary of instrument

 Source: https://www.icranepal.com/