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JM | Sep 22, 2022

CariCRIS reaffirms DBJ’s good credit ratings

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Ratings underpinned by DBJ’s sound risk management framework, strong capital base

The Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed its good credit rating on the Development Bank of Jamaica (DBJ).

CariCRIS has reaffirmed its assigned issuer/corporate credit ratings of CariBBB+ (Foreign Currency Rating) and CariA- (Local Currency Rating) on the regional scale. The ratings agency has also assigned a rating of jmAA (Local Currency Rating) and jmAA- (Foreign Currency Rating) on the Jamaica national scale to the US$5-million notional debt issue of the DBJ.

CariCRIS explains that the regional scale ratings indicate that the level of creditworthiness of this debt issue, adjudged in relation to other debt obligations in the Caribbean is good while the Jamaica national scale ratings indicate that the creditworthiness of the debt of the DBJ, adjudged in relation to other debt obligations in Jamaica is high.

The Development Bank of Jamaica.

It added that the ratings, covering the period April 1, 2021 to March 31, 2022, include a two-notch uplift for the high likelihood of support, if needed, from DBJ’s sole shareholder, the Government of Jamaica. CariCRIS has also maintained a stable outlook on the ratings, based on its expectation that the DBJ will continue to display good profitability and capitalisation levels.

This capital level is supported by anticipated improvements in economic activity over the next 12 to 15 months despite the ongoing uncertainties of the pandemic and the Russia/Ukraine conflict.

DBJ viewed as sound with strong capital base

According to CariCRIS, the DBJ’s ratings reflect its “continued strategic importance to the Government of Jamaica in the divestment of state assets and the allocation of capital to strategic investments. The ratings are also underpinned by DBJ’s sound risk management framework, strong capital base which is supported by a healthy capital adequacy ratio and good liquidity metrics. The Bank’s comfortable financial performance in 2021 supported by lower NPL [non-performing loans] levels further support these ratings”.

However, CariCRIS has outlined some of the factors that could lead to an improvement or lowering of the ratings/outlook of the bank. It cited one factor that could lead to an increasing of the rating and/or outlook, as the improvement of business conditions over the next 12-15 months, thereby leading to growth in client base and sustained earnings growth.

Anthony Shaw, managing director of the Development Bank of Jamaica. (Photo: dbankjm.com)

Conversely, factors leading to a lowering of the rating or outlook include a reduction in funding by more than 25 per cent, interest rate spread falls by more than 150 bps and a lowering of the creditworthiness of Jamaica. In welcoming the positive assessment, DBJ Managing Director Anthony Shaw was particularly pleased with CariCRIS’ assessment of the bank’s handling of its affairs.

“The DBJ is a very well-run organisation, thanks to the highly qualified and experienced professionals who comprise the board of directors and staff,” Shaw said, highlighting that the DBJ takes pride in its reputation as a stable financial organisation, comparable to any private sector-run financial entity.

CariCRIS is the Caribbean’s regional credit rating agency aimed at fostering and supporting the development of regional debt markets.

A CariCRIS credit rating is an objective assessment of an entity’s creditworthiness relative to other debt issuing entities and provides a regionally relevant risk assessment of entities and the debt that they issue within a wider context of an analysis of economic trends and financial developments.

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