Agency cuts Victoria Bank’s credit rating

South Africa-based Global Credit Ratings (GCR) has downgraded the credit profile of Victoria Commercial Bank (VCB) Limited.

GCR scaled down the lender's long and short-term national scale issuer rating to BBB(KE) and A3(KE) respectively with a stable outlook.

The agency said the rating downgrade has been triggered by a decline in asset quality largely due to the adverse impact of the Covid-19 pandemic in the period to June 30, 2021.

It said this is reflected by the year-on-year expansion in non-performing loans in the period.

"The NPL ratio was 6.6 percent at December 2020, edging higher to 11 percent at June 2021, marginally below industry average but still outperforming the peers," said GCR.

"The spike in NPL ratio and credit losses at about 2.5 percent have seen a moderation in the risk position strength while we also note concentration towards vulnerable sectors as a potential for further downgrade in risk position."

The agency said the lender’s loan book is concentrated to vulnerable sectors including manufacturing, trade, construction and real estate, driving the majority of the current NPLs. The agency warned that that a further downgrade could be caused by sustained higher NPLs.

The lender reported a net profit of Sh511.9 million last year, down from Sh527.1 million in 2019. Its best performance was in 2015 when net profit grew by 54 percent to Sh713.8 million.

Central Bank of Kenya (CBK) data shows that as at the end of last year, Victoria was the largest tier three lender in the country by market share ( of 0.74 percent) with net assets worth Sh37.89 billion and 10,000 deposit accounts.

Victoria Bank mainly focuses on large corporations and high-net-worth clients. The lender started off as Victoria Finance Company, a non-bank finance institution but converted into a bank in 1996, following the issuance of a banking license by the CBK.