ICRA Nepal reaffirmed the rating of Himalayan Bank Rs 600 million Subordinated Bond

ICRA Nepal has reaffirmed the rating of[ICRANP] LA(pronounced ICRA NP LA) assigned to NPR 600 million-subordinated bonds of Himalayan Bank Limited (HBL).Instruments with this rating are considered to have an adequate degree of safety regarding the timely servicing of financial obligations. Such instruments carry a low credit risk.

The rating action factors in the bank’s cautious credit growth approach in the last few years whilst following prudent risk management practices and adequate underwriting controls. The bank’s improved capitalisation (CRAR of 14.73% as of mid-January 2020)along with the experienced board/management profile remain positives for controlled growth going forward. The rating also takes into consideration the bank’s long track record (since 1993),adequate earnings profile and relatively moderate portfolio concentration risks.The rating further continues to be supported by the presence of strong institutional promoters,with representation on its board.

Strengths

• Controlled and cautious credit growth in recent periods
• Long track record and presence of institutional promoters
• Healthy capitalisation profile
• Adequateprofitability profiledespite high operating cost

Challenges

• Moderation in deposits profile
• Relatively moderate asset quality; high reliance on corporate borrowers could impact asset quality
• Changing regulatory landscape could affect growth and scale economies
• Analytical approach

Bank Profile

The Himalayan  Bank  Limited  (HBL)  was  incorporated  in  1992  by  a  few  individuals  of  Nepal  in  partnership  with the Employees  Provident  Fund,  Nepal  (14%  share)  and  Habib  Bank  Limited  of  Pakistan  (20%  share).  The  bank  started  its commercial operations from  January 1993. Its head office is located at Kamaladi, Kathmandu. Its shareholding pattern constitutes  ~65%  promoters  holding,  20%  of  foreign  holding  and  15%  public  holding.  Shares  of  the  bank  are  listed on the Nepal Stock Exchange. Mr. Ashoke SJB Rana is the Chief Executive Officer of the bank. HBL  has presence  across  the  country  through  its  64  branches  as  of  mid-April  2020. The  bank has  a market  share  of 3.68% in terms of deposit base and 3.89% in terms of the credit portfolio of commercial banks as of mid-January 2020. HBL reported a profit after tax (PAT) of NPR 2,764 million for FY2019 (YoY growth of ~47%) over an asset base of NPR 133,151  million as of  mid-July 2019. For H1 FY2020, the bank has reported a profit of  NPR 1,049  million over an asset base of NPR 141,632 million as of mid-January 2020. The reported CRAR of the bank was 14.73% and gross NPLs were 1.28% as of mid-January 2020. It uses Temenos Globus (T24)as the core banking software across all its branches.

Source: www.icranepal.com

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