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The global rating agency S&P on Thursday rated local BRAC Bank 'B+' for the long term and 'B' for the short term, according to a press release.
"We affirmed our 'B+' long-term and 'B' short-term issuer credit ratings on BRAC Bank PLC. The outlook on the long-term rating remains stable," the release states.
"BRAC Bank will maintain its financial profile amid tough operating conditions," it adds.
"We estimate its risk-adjusted capital (RAC) ratio will be in the range of 4.0 per cent-5.0 per cent over the next two years. This was 3.3 per cent at the end of December 2024, down from 3.7 per cent in 2023."
"The country is navigating a period of heightened economic and political volatility, which has weighed on our assessment of credit conditions in Bangladesh," the release says.
BRAC Bank's improved profitability, high earnings retention and calibrated loan growth should support the RAC ratio over the next two years. BRAC Bank's financial profile should be stable, it adds.
"The bank has a record of prudent management that will help it navigate this period of volatility."
"We expect the bank's non-performing loan ratio to stay at 3.1 per cent-3.5 per cent over the next 12-18 months, significantly lower than the average for Bangladesh's banking sector."
The bank's balanced loan book and proactive risk management should keep asset quality healthy.
"The stable outlook on BRAC Bank reflects our view that the bank should be able to steadily navigate challenging operating conditions in Bangladesh and maintain its financial profile over the next 12-18 months."
"Though unlikely over the next 12-18 months, we may lower the ratings if BRAC Bank's asset quality deteriorates sharply, due, for example, to strategic missteps or broader macroeconomic vulnerabilities," it states further.
"We may also lower the ratings if BRAC Bank's RAC ratio declines and stays below 3.0 per cent on a sustained basis. This could be due to more aggressive growth or higher credit costs, leading to weaker profitability than we anticipate," it says.
jasimharoon@yahoo.com