International rating agency Fitch has revised National Commercial Bank (NCB) Jamaica’s outlook from positive to negative. At the same time, it has affirmed NCB’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at ‘B+’.

The negative outlook on NCB Jamaica IDRs reflects the downside risk to its credit profile resulting from the economic implications of the novel coronavirus disease (COVID-19) pandemic.

According to Fitch, “The outlook revision is mainly driven by the adjustment of Fitch’s assessment of the operating environment outlook to negative due to the weaker operating conditions that will likely result in asset quality deterioration and will weigh on profitability.”

In Fitch’s view, NCB Jamaica will face the ongoing crisis with relatively stronger financial fundamentals compared with regional peers, as its ratios are well commensurate with the ‘B+’ rating. Nevertheless, Fitch believes that the expected contraction of the economy by four per cent in 2020 will negatively affect the bank’s financial performance.

In addition, the magnitude and depth of this impact is uncertain and will depend on the length of the crisis. Furthermore, Fitch recently revised Jamaica’s sovereign rating outlook to stable from positive.

Jamaica’s Long-Term Foreign-Currency IDR is affirmed at B+. “The outlook change of the sovereign rating reflects the shock from the coronavirus pandemic, which is expected to lead to a sharp contraction in its main sources of foreign currency revenues: tourism, remittances and alumina exports,” Fitch explained.

The negative rating outlook could be revised to stable if the impact of the coronavirus shock is lower than expected and the recovery is relatively fast, which will also depend on the ability of the bank to deal with current challenges.

The ratings outlook is currently negative, which makes an upgrade highly unlikey in the near future.

Generally, factors that could cause a downgrade include an extended period of economic disruption as a result of the coronavirus that leads to a significant deterioration in the operating environment as well as a worsening asset quality and/or profitability and an erosion of capital cushions.

NCB Jamaica IDRs are driven by viability rating or standalone creditworthiness, which is highly influenced by Jamaica’s operating environment and the bank’s company profile. Fitch considers the bank’s intrinsic exposure to the Jamaican economy as high through its investments in the Bank of Jamaica and Government of Jamaica debt securities.

NCB is the largest bank in Jamaica with a consolidated market share by assets and loans of 38 per cent and deposits of 32 per cent during 2019. It enjoys leadership in all major sectors through its diverse corporate and retail banking.