Capital Intelligence (CI) has announced that it has affirmed
The Bank's rating is however constrained by the low total capital to total assets ratio compared to its peers, the high level of interbank borrowings, concentrations in its deposit base and the below peer group average operating and net profitability. The Bank's overall financial profile nonetheless remains sound, and together with the positive economic prospects for
A negative impact of the steady loan expansion over the years was the decline in the capital adequacy ratio (CAR). The Bank's total capital to total assets ratio has also fallen to the lowest in CI's peer group. While CAR stood at a satisfactory level at end Q1 2014, it could nonetheless constrain loan growth going forward. However, the Bank has a strong internal capital generation rate supported by the sustained good growth of earnings and a modest dividend payout ratio.
On the earnings side, key profitability parameters – except for net profitability – have weakened marginally, although the decline was in line with the trend for the sector, reflecting the persistently low interest rate environment and the high competition in what is a relatively small market. While the Bank was able to lower funding costs and increase non-interest income (NII) to combat some of the compression of interest margin, both its operating and net profitability ratios remained below the peer group average. That said, the gap is narrowing fast.
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