Multibank’s VR is highly influenced by its operating environment, as the slow economic recovery resulting from the corona virus outbreak puts pressure on the stability of the entity’s asset quality and profitability. Multibank is a commercial bank with a diversified business model, although its franchise remains moderate, and its business profile also has an important influence on its VR.
Here Traders Union provides some 2020 Multibank Reviews that leads traders to draw a rational conclusion.
Multibank Reviews of 2020:-
The limited growth of loans, derived from the non-recurring exit of a portion of the loan portfolio after the acquisition and the increase in delinquency levels due to the pandemic affected the quality of the assets of the bank during 2020. The indicator of impaired loans relative to gross loans increased to 2.1% from an average of 1.7% in the last three years. However, the reserve coverage provides an adequate cushion against the deterioration of loan portfolios, since it was 168% at the close in 2020 when considering the dynamic provision and excess reserves in equity.
Multibank’s Tier 1 Common Equity Tier 1 (CET1) indicator showed a slight decline during 2020 due to lower profitability levels. In 2020, the indicator was 12.2%, below some of its highest rated peers, but still providing adequate margins above regulatory requirements.
Factors that could, individually or collectively, lead to negative/downgrading action:
Any negative action on the IDR of its parent would lead to a similar action on the IDR and SR of Multibank. In addition, the IDR and SR could also change if Fitch’s assessment of its parent’s willingness to support its subsidiary changes; Senior debt does not.
The reduction of Multibank would reflect any possible decrease in its IDR.
Multibank’s VR could be reduced as a result of the effects of the pandemic on its business and financial profile. Its VR could be pressured by a sustained deterioration in profitability (operating profit at APR below 0.5%) and asset quality indicators that weaken the bank’s financial performance, which would drive a decrease of its CET1 indicator consistently below 10 %.
Factors that could, individually or collectively, lead to a positive / upgrade rating action:-
Positive rating actions on Multibank’s IDR and SR are unlikely given the Negative Outlook of its parent’s international ratings. However, Multibank’s Negative Outlook could be revised to Stable in the event of positive actions or revisions to IDR Outlook.
In the medium term, the VR of Multibank could rise due to the combined effect of an improvement in the operating environment and the bank’s financial profile.
Multibank’s senior unsecured debt would reflect any possible improvement in the bank’s ratings.
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