S&P Global Ratings on Monday changed its future view for NCB Financial Group (NCBFG) and its main banking unit, National Commercial Bank Jamaica (NCBJ), from “stable” to “positive”.

This “positive outlook” means there is an increased chance the entity’s credit ratings could be upgraded within the next year or two. S&P confirmed its current ratings for now, which are ‘BB-’ for NCBJ and ‘B-’ for its parent company, NCBFG.

The decision is directly linked to the recent improvement in Jamaica’s own national credit rating. Last month, S&P upgraded Jamaica’s rating, praising the Government’s consistent discipline in managing its budget and reducing debt.

S&P explained that a healthier government budget means Jamaica is in a better position to support its banking system if it ever runs into trouble. This has led to an improved score for the overall risk level of the country’s banking industry.

The ratings agency also pointed to a stronger Jamaican economy. A steady flow of money from tourism and remittances sent home from abroad has boosted the country’s foreign reserves and helped stabilise the Jamaican

dollar.

S&P expects the economy to grow by 2 per cent this year, settling into a steady pattern afterwards. This more stable environment is better for banks to operate in.

For the financial entities themselves, S&P noted NCBJ’s position as Jamaica’s largest bank, with a diverse range of services. Its parent company, NCBFG, was highlighted for its spread across different businesses and regions, including its ownership of a major insurance company.

The main factor that could lead to an actual ratings upgrade for both companies would be a further improvement in S&P’s overall assessment of Jamaica’s banking environment. If the positive economic trends continue, the banks’ ratings are likely to be raised.

The report did note some cautions. NCBJ’s level of bad loans, while manageable, is still higher than before the pandemic. For NCBFG, its subsidiary in Bermuda holds some riskier loans linked to the tourism and construction industries.

S&P also stated that if Jamaica’s economic progress stalls, the “positive” outlook could be shifted back to “stable”.