ICRA Lanka Limited, subsidiary of ICRA Limited, a group company of Moody’s Investors Service, has reaffirmed the issuer rating of MCB Bank’s Sri Lanka branch (MCBSL or the Bank) at [SL]A+ (Pronounced SL A plus).
The outlook on the rating is Stable.
The rating factors in the financial, managerial and operational support provided by MCB Bank Limited, Pakistan (MCBP; rated Caa1/ NP by Moody’s) to its Sri Lankan branch operation. The rating takes note of the comfortable capitalisation profile with Total Capital ratio including – Capital Conservation Buffer (“CCB”) at 28.23% as in Sep-19 compared to minimum regulatory requirement of 12.50%.
Further, the Bank’s core capital was at LKR 6.2 Bn as in Sep-19, against regulatory minimum requirement of LKR 5.0 Bn by Dec-20. The capital profile was supported by healthy profitability indicators with Return on Assets of 1.35% and Return on Equity of 6.32% in 9MCY2019.
The rating takes note of MCBSL’s weak asset quality profile with gross NPA[1] of 4.13% as in Sep-19 vis a vis 5.73% as in Dec-18 (4.18% as in Dec-17).
The rating however takes cognizance of MCBSL’s modest size and franchise, geographically concentrated presence, its concentrated exposures and a moderate deposit profile.
MCBSL’s lending and deposit portfolios are quite concentrated with top 10 exposures accounting for about 71% and 45%, respectively as in Sep-19.
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