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Victoria Commercial Bank gets rating upgrade

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Dr Yogesh Pattni chief executive officer Victoria Commercial Bank of Kenya. FILE PHOTO | NMG

Victoria Commercial Bank has received credit rating upgrade by South Africa based Global Credit Ratings (GCR) on the back of good earnings and capital levels.

Previously, Victoria was rated at BBB(KE) on long-term basis but has now been raise to BBB+(KE), with the short-term rating held at A2(KE). The new ratings are valid until July 2019.

The GCR has however raised concern at the tier three lender’s lack of product diversity and low number of clients, which implies lower systemic importance relative to larger peers.

“GCR has upgraded Victoria Commercial Bank Limited’s long-term national scale rating to BBB+(KE) and maintained the short-term national scale ratings of A2(KE), with the outlook accorded as stable,” the agency.

The lender which commenced its operations in 1987, targets small and medium-sized enterprises. Victoria is predominantly funded by customer deposits comprising 71 per cent, shareholder funding 22 per cent, and development finance institutions (DFIs) and others contributing seven per cent.

Victoria’s net profit before tax went up by 6.6 per cent to Sh849.2 million in 2017, helped by a 37.7 per cent increase in fee and commission income, while net operating income increased by 16 per cent.

The bank however, has been incurring relatively high funding costs owing to its narrow target market for deposit generation and lack of transactional deposits.