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Fitch affirms Commercial Bank 's AA+ (sri) rating
The agency also affirms the AA(sri) rating assigned to CB's subordinated debentures and the AA-(sri) rating assigned to CB's redeemable preference shares. The rating outlook is stable. AA+ (sri) rating denotes a very low expectation of credit risk. It indicates very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. CB has maintained its sound financial profile, which is possibly the best amongst the local commercial banks. Besides its traditional strength in corporate banking CB has developed a banking franchise amongst small and medium sized companies, as well as consumers. In 2004 retail and consumer banking accounted for around 42% of loans and approximately 45% of profits. CB achieved double digit growth in both total loans as well as revenues over the last couple of years. However profitability as measured in terms of ROA (after accounting for preference dividends) has declined to 1.2 % for the 9 months to September 2004, compared to 1.4% in 2003, largely due to higher taxes as well as somewhat lower margins endured in its pursuit of loan growth. Nonetheless, CB's profitability and efficiency ratios continue to rank above most of its major competitors. The destruction caused by the recent Tsunami will also impact CB's results in 2004 and possibly 2005, but not significantly. CB estimates that borrowers with outstanding loans of around Rs 400 mn (0.5% of total loans) were directly affected, but expects write offs to be substantially lower. CB's acquisition of the Bangladesh operations of Credit Agricole (about 8% of CB's assets), in November 2003 contributed positively, and is likely to provide the bank with growth opportunities and some diversification benefits in the future. |
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