ICRA Nepal assigns ICRA LA- rating to proposed Rs 3 arba subordinated bonds of NIC Asia Bank

ICRA Nepal has assigned rating of [ICRANP] LA- (pronounced ICRA NP L A minus) to the proposed subordinated bonds of Rs 3 arba of NIC Asia Bank Limited (NICA). ICRA Nepal has also reaffirmed the rating of [ICRANP] LA- to the existing subordinated bonds of Rs 50 crore of NICA. Instruments with [ICRANP] LA- rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk. Likewise, ICRA Nepal has also reaffirmed issuer rating of [ICRANP-IR] A- (pronounced ICRA NP Issuer Rating A Minus) to NIC Asia Bank Limited (NICA). [ICRANP-IR] A- rating are considered as adequate credit quality rating assigned by ICRA Nepal. The rated entity carries average credit risk. The rating is only an opinion on the general creditworthiness of the rated entity and not specific to any particular debt instrument. The sign of + (plus) or – (minus) appended to the rating symbols indicate their relative position within the rating categories concerned. The rating assignment/reaffirmation factors in NICA’s established track record (operating since 1998) and diversified franchise leading to good market positioning in Nepal with ~5% and ~4% share in industry deposits and credits respectively. The ratings also factor in the continuous improvement in gross NPL levels of the bank (from 2.07% as on mid-Jul-15 to 0.29% as on mid-Oct-17) despite of seasonal spike in delinquencies witness in Mid-Oct-17 (~5% as of Jul-17, slightly spiked to ~9% as of Oct-17). While assigning the ratings, ICRA Nepal also considers the improvement in profitability profile (RoA and RoNW of 1.64% and ~17% for FY2017 vs. 1.21% and ~13% for FY2015) despite increase in capital base over last two years, required as per regulations. ICRA Nepal also positively takes note of the bank’s increasing focus towards retail and SME lending which contributes to ~72% of portfolio as of Oct-17 (vs. ~55% on Jul-15) and has aided the improvement in granularity of credit portfolio (~12% among top 20 borrower groups as of Oct-17 vs. ~18% on Jul-16). Despite the tight liquidity conditions and consequent stress in deposits for the banking industry in recent periods, bank was also able to improve its deposits profile in terms of mix and concentration as well; CASA4 improved to ~39% as of Oct-17 vs. 32% on Jul-16 and concentration among top 20 customers came down from 37% to 26% over same period.