Business
Standard & Poor’s downgrades the Caribbean Development Bank (CDB)
It said the CDB determined no public-sector loans were impaired in 2011, “and it has not taken provisions for its public-sector portfolio,” stating that two private-sector impaired loans represented 21 percent of the private sector loan portfolio at the end of 2011.
S&P said the bank has taken a 47 percent provision against these loans. It said the CDB’s loan portfolio growth slowed to 2 percent in 2011 from 21 percent in 2010.
“The CDB recognized comprehensive income of US$41 million in 2011 and US$42 million in the restated 2010 period,” it said.
“However, the bank’s net interest margin (net interest and similar income-to-average loans outstanding) and its investment income-to-average investments outstanding have decreased since 2009, a trend of lower profitability that, if continued, could put pressure on the bank’s generated cash flows in the medium term,” S&P added.
It noted that the Barbados-based CDB has experienced recently a change of senior management and that it was in the process of filling a number of senior positions.
It said the bank is also reviewing its risk management and capital adequacy frameworks, which are expected to be completed by the end of 2012.
“Despite the aforementioned qualitative weaknesses, we believe that the CDB’s financial profile, especially its very strong capitalization, supports the rating,” S&P said.
“The CDB traditionally has been well-capitalized and continued to be so as of the end of 2011, with narrow risk-bearing capacity to development-related exposure (DRE) of 60 percent,” it added.
“The stable outlook reflects our expectation that the financial profile will remain stable, with new capital subscriptions offsetting lower profitability seen this past year and that it will remain so in the near future,” S&P continued.
It said it expects the continuation of “preferred creditor treatment and the bank’s “prominent position” as a lender in its borrowing member countries.
