ICRA Nepal upgrades rating of Rs 60 crore worth of Subordinated Bond Programme to ICRANP LA+ from earlier ICRANP LA-

ICRA Nepal Limited has upgraded the rating of Everest Bank’s NPR 60 crore worth of Subordinated Bond Programme (8% EBL Bond-2078) to [ICRANP] LA+ (Pronounced as ICRA NP L A Plus) from [ICRANP] LA- (Pronounced as ICRA NP L A Minus). Subordinated Debenture Rating A+ is two notch higher than A-.

Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligation. Such instruments carry low credit risk.

Note: +/- signs indicates their relative position within the Rating category concerned by one notch higher/lower.

ICRA Nepal notes that the assets quality, solvency and profitability profile did not come under major stress in the aftermath of earthquake and subsequent customs blockade. The rating also factors in EBL’s long track record (operating since 1994), commensurately seasoned credit portfolio and adequate market share (~4% share in overall banking industry deposit and credit base). This coupled with established underwriting norms and embedded risk management practice, provides comfort on the incremental assets quality of the bank.

The rating also draws comfort from good ownership profile of the bank. EBL has 20% equity participation from Punjab National Bank (PNB)2 , the second largest public-sector bank in India and a technical support service agreement (TSSA) with PNB. As per the terms of TSSA, three senior officials from PNB are deputed to EBL as senior management team (including CEO).

The rating is however constrained by EBL’s relatively higher portfolio concentration among top borrower groups and depositors. As on mid-April 2018, ~26% of total credit and ~33% of total deposits are accounted for by top 20 borrower groups and top 20 depositors respectively.