Victoria bank retains rating on clean loans records

Victoria Commercial Bank (VCB) has retained its credit rating, riding on its history of operating without a loan default for the last 10 years.

South Africa’s Global Credit Ratings (GCR) agency assigned a rating of BBB to the small lender who has a 0.54 per cent market share, with a stable outlook.

“The ratings of VCB reflect its successful relationship-based niche private banking model and broadly stable credit profile, supported by robust asset quality, comfortable capitalisation, strong liquidity and sound profitability,” said GCR in the rating report.

VCB boasts loans totalling Sh13.1 billion being serviced in time in a period that other lenders in the country grappled with rising defaults.

The banking sector’s non-performing loans have shot up to a decade-high Sh170 billion, 8.2 per cent of the total loan book.

The positive rating is set to bring to the fore discussions on the importance of small lenders in the country following recent recommendations by the National Treasury to increase minimum core capital in a bid to force consolidation in the banking sector.

The Treasury holds that 43 licensed banks in a population of 20 million bankable customers denies the country the economies of scale that it requires.

The Central Bank of Kenya has previously differed with the Treasury, arguing it was not size that matters but rather prudence and corporate governance.

Recent collapses of Imperial, Chase and Dubai banks have appeared to give legislators reason to pass the law proposed by the Treasury.

VCB’s core capital stood at Sh3.4 billion as at end of March, lower than the Sh5 billion proposed by the Treasury.

The bank has three branches through which it serves an estimated 3,000 customers, who have deposited with it Sh14 billion. It reported a 53-per cent growth in aftertax profit for last year to Sh713 million.