Arpico Finance's short-term rating has been confirmed at NP, RAM Ratings said.
Outlook on the long-term rating has been revised to positive from stable.
"The company's ratings are supported by its better-than average asset quality and adequate capital base," RAM Ratings said in a statement.
"However, the ratings are weighed down by high overheads."
Established in 1951, Arpico is the second-oldest registered finance company in the island but has remained small, accounting for less than one percent of the industry’s total assets as at end-March 2010.
The Company’s gross non-performing loans (NPL) ratio improved to 3.08 percent of total loans as at end-August 2010, from 4.83 as at end- March 2009.
Arpico has managed to bring down gross NPLS from high levels seen in 2004 despite a harsh economic climate while others in industry reported worsening bad loans, RAM Ratings said.
"Adequate provisioning has permitted Arpico to record a better net NPL ratio of 1.26 percent as at end-August 2010 compared to 2.41 in end-March 2009."
The company's asset quality has improved while overhead costs have risen and demand for real estate has seen a decline in the past year.
Arpico's cost-to-income ratio has increased to 94.35 percent by March 2010 compared with 90.48 percent, a year ago.
The ratings agency expects Arpico’s performance to improve once the new branches break-even.
"The Company’s capital cushioning is adequate with overall capital-adequacy ratios remaining at a respective 14.83 percent and 17.51 percent as at end-March 2010, well above the minimum statutory requirements of five and ten," the agency said.