Fitch Revises National Commercial Bank of Jamaica's Outlooks to Negative;
NEW YORK -- January 25, 2013
Fitch Ratings has revised the Rating Outlooks for National Commercial Bank
Jamaica Limited (NCBJ) to Negative from Stable and affirmed the long-term
foreign and local currency Issuer Default Ratings (IDR) at 'B-'. A full list
of rating actions follows at the end of this release.
RATING ACTION RATIONALE
The Outlook revisions on NCBJ's IDRs are in line with a similar action that
Fitch took on Jamaica's sovereign ratings, given the bank's exposure to the
government of Jamaica and the potential for a more challenging operating
The sovereign's Outlook revision to Negative from Stable reflected Jamaica's
rising financing constraints in the context of elevated fiscal and external
SENSITIVITY/RATING DRIVERS - VR & IDRs
NCBJ's Viability Rating drives its long-term IDRs. The bank's VR reflects its
strong domestic franchise, solid profitability, and adequate capitalization.
Nevertheless, NCBJ's ratings remain constrained by the sovereign's weak credit
profile given high exposure to the Jamaican government, lending
concentrations, as well as a challenging operating environment.
Investments and loans to the Jamaican government, public entities and entities
with a Jamaican government guarantee continued to represent a high proportion
of NCBJ's total assets at 52%, or about 3 times (x) its equity, in the fiscal
year ended September 2012 (FYE12). Fitch remains concerned about this high
asset concentration given Jamaica's low sovereign rating [Long-term Issuer
Default Rating (IDR) of 'B-' with a Negative Rating Outlook].
Future rating actions will be highly contingent on a change in Fitch's view of
the sovereign given the bank's sizable sovereign exposure. Additionally, a
downgrade of the bank's ratings could be driven by an unexpected marked
deterioration of asset quality that weakens profitability or capitalization to
a level that is no longer consistent with its current peers (emerging market
commercial banks with a VR of 'b-', 'b' or 'b+').
SUPPORT RATING AND SUPPORT RATING FLOOR
The bank's Support rating is constrained by the sovereign's weak credit
profile. However, the Support floor of 'B-' indicates Fitch's view that NCBJ's
systemic importance makes the government's propensity to support the bank high
although its capacity may be weak.
NCBJ is the largest bank in the system in terms of assets with more than 40%
market share of the commercial banking system in recent years. In 2002, the
Jamaican government sold a majority stake in the bank to Advantage Investment
Corporation (AIC), one of Canada's largest privately held mutual fund
Fitch has affirmed NCBJ's ratings as follows:
--Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B-';
Outlook revised to Negative from Stable;
--Short-term foreign and local currency IDR at 'B';
--Viability Rating at 'b-'
--Support Rating at '5';
--Support floor at 'B-'.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Fitch Revises Jamaica's Outlook to Negative; Affirms Rating at 'B-'' (Jan.
--'National Commercial Bank of Jamaica Limited (NCBJ)' (April 26, 2012).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
National Commercial Bank of Jamaica Limited (NCBJ)
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Theresa Paiz Fredel
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New York, NY 10004
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