ICRA Nepal downgrades the rating of Nepal Investment Bank Limited to [ICRANP-IR] A and [ICRANP] LA with removal of watch

ICRA Nepal...

ICRA Nepal has downgraded the issuer rating of Nepal Investment Bank Limited (NIBL) to [ICRANP-IR] A (pronounced ICRA NP issuer rating A) from [ICRANP-IR] A+ (pronounced ICRA NP issuer rating A plus). Issuers with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such issuers carry low credit risk. The rating is only an opinion on the general creditworthiness of the rated entity and not specific to any particular debt instrument. 

ICRA Nepal has also downgraded the bank’s subordinated debentures rating to [ICRANP] LA (pronounced ICRA NP L A) from [ICRANP] LA+ (pronounced ICRA NP L A plus). Instruments with this rating are considered to have adequate degree of safety regarding the timely servicing of financial obligations. Such instruments carry low credit risk. The ratings have been removed from ‘under watch with negative implications’ category. The sign of + (plus) or – (minus) appended to the rating symbols indicates their relative position within the rating categories concerned.

Strengths

  • Long track record and experienced board/management remain positives for growth outlook
  • Adequate capitalisation
  • Controlled growth approach
  • Fair cost of deposits among top-tier banks, moderate concentration
  • Diverse income sources and low operating cost

Challenges

  • Stress in asset quality
  • High credit concentration
  • Profitability profile likely to remain muted for FY2020

Bank Profile

Nepal Investment Bank Limited (NIBL)[1], previously Nepal Indosuez Bank Ltd., was established in 1986 as a joint venture between Nepalese and French partners. In April 2002, the French partner, Credit Agricole Indosuez (holding 50%), sold its stake to a group of companies comprising bankers, professionals, industrialists and businessmen in Nepal. The name of the bank was then changed to Nepal Investment Bank Limited. The bank is promoted by several insurance companies, retirement funds and investment companies, the most prominent being Rastriya Beema Company Limited (12.15%). Its shares, which are listed on the Nepal Stock Exchange, are held by the promoters and the public in the ratio of ~69:31. NIBL’s registered office is in Durbarmarg, Kathmandu.

NIBL had 82 branches spread throughout the country as of mid-October 2019. It had a market share of 5.08% in terms of the deposit base and 5.26% of the total advances of the commercial banking industry as on the same date. NIBL reported a profit after tax (PAT) of NPR 3,324 million in FY2019 (YoY de-growth of ~9%) on an asset base of NPR 185,670 million as of mid-July 2019. In Q1 FY2020, it reported a PAT of NPR 844 million on an asset base of NPR 186,813 million. As of mid-October 2019, NIBL’s CRAR was 13.17% and gross NPLs were 2.84%. In terms of the technology platform, NIBL has implemented Finacle at all its branches.

Summary of rated facilities/instruments

Facility/Instrument

Rated Amount 

Rating Action

Issuer rating

NA

[ICRANP-IR] A; downgraded from [ICRANP-IR] A+

Subordinated Debenture Programmes

NPR 2,750 million

[ICRANP] LA; downgraded from [ICRANP] LA+

Source: https://www.icranepal.com/