Fitch gives banking major MCB favourable ‘BBB-’ default rating with stable outlook
Key rating drivers of the favourable rating are the bank`s leading franchise in small but relatively stable domestic market, adequate underlying profitability, solid funding and liquidity profile as well as MCB’s simplified organisational structure following a restructuring exercise in 2014. (Image: MCB)
The Mauritius Commercial Bank Limited (MCB) has been assigned a Long-term Issuer Default Rating (IDR) of ‘BBB-’ and Viability Rating (VR) of ‘bbb-’ by Fitch ratings in London on Tuesday, 10 March 2015.
Global ratings major Fitch is one of the three nationally recognised statistical rating organizations (NRSRO) designated by the US Securities and Exchange Commission in 1975, together with Moody’s and Standard & Poor’s, and these three are commonly known as the “Big Three credit rating agencies.”
MCB is Mauritius’ oldest and largest bank and the main operating bank of MCB Group Limited (MCB Group) is the largest listed company on the Stock Exchange of Mauritius (SEM) with a market capitalisation of approximately Rs 48 billion, capturing 21.6% of the total official market and trades at the current price of Rs 201.
The market share of deposit and lending in Mauritius is dominated by the bank which captures 40% of each segment.
Key rating drivers of the favourable rating are the bank`s leading franchise in a small but relatively stable domestic market, adequate underlying profitability, solid funding and liquidity profile as well as MCB’s simplified organisational structure following a restructuring exercise in 2014.
Fitch has assigned a ‘BBB’ ratings from the IDR scale of `AAA` to D, indicating that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions might impair this capacity.
Headquartered in Mauritius, MCB provides retail, commercial, card and payment services in its home market and the bank is also increasingly active in trade finance in the Sub-Saharan region. This diversification strategy could ultimately improve the bank’s earnings and risk diversification, but in the short to medium term, it exposes the bank to comparatively higher execution and strategic risks.
Credit is positive for MCB’s counterparties and depositors, and the bank profitability is robust, benefiting from a good product mix and strong pricing power that result in adequate margins.
In 2014, high loan impairment charges and persistent excess liquidity hampered the results of the bank. In 2015, however, Fitch analysts expect MCB’s profitability to moderately improve as loan impairment charges should gradually fall and central bank measures should tackle excess liquidity in the domestic banking system.
The Stable Outlook on MCB’s Long-term IDR reflects expectation that the bank will report adequate profitability in the medium term and improve its capitalisation in the short term, the Fitch assessment concluded.
About Fitch Group:
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Source: Company Website