Standard Chartered Bank rated triple-A (AAA) for the second year in a row

ICRA Nepal has reaffirmed the issuer rating of [ICRANP-IR] AAA (pronounced ICRA NP issuer rating triple-A) to Standard Chartered Bank Nepal Limited (SCBNL). The rating is considered to have the highest degree of safety regarding the timely servicing of financial obligations. Such issuers carry the lowest credit risk.

Standard Chartered Bank Nepal Limited (SCBNL) is the second foreign joint venture in the Nepalese financial sector. The bank was incorporated in January 1987 as Nepal Grindlays Bank Limited and was subsequently renamed SCBNL in July 2001, following the acquisition of the parent, ANZ Grindlays Bank, by Standard Chartered Bank. The bank’s shares are listed on the Nepal Stock Exchange and its registered and corporate office is in New Baneshwor, Kathmandu.

This is the second time that ICRA Nepal gave SCB the triple-A rating. However, the issuer rating is only an opinion on the general creditworthiness of the rated entity and not specific to a particular debt instrument.

The rating is attributed to the bank’s established track record (operating since 1987) and robust risk management and underwriting practices, which are reflected in its ability to maintain a strong asset quality in recent quarters despite the impact of the Covid-19 pandemic.

The bank’s non-performing loans (NPLs), despite increasing slightly amid the pandemic, remained low at 0.44% as of mid-July 2020, which also remains on the lower side in the industry. According to ICRA Nepal, "SCBNL continues to maintain a strong capitalization profile with a capital-to risk-weighted-assets ratio (CRAR) of 18.54% as of mid-July 2020, which enables it to withstand potential credit shocks in the current uncertain economic condition. This remains a major comfort for the rating action."

Standard Chartered Bank's profitability was primarily supported by adequate net interest margins along with the strong fee-based income and low credit costs.

These are the key rating drivers that led the bank to maintain its triple-A standard:

a) Strong promoter group and experienced board/management; proven track record
b) Strong asset quality and solvency profile; cautious approach towards credit growth
c) Superior deposits profile with highest low-cost deposits, resulting in the lowest cost of funds among private sector banks
d) Strong capitalization. ICRA Nepal expects the bank's capitalization levels to remain adequate to support its growth plans, as well as to absorb any potential slippage.