Fitch affirms Citibank Colombo Branch at ‘AAA’, Outlook stable

Fitch Ratings Lanka has affirmed Citibank N.A. - Colombo Branch’s (CitiSL) National Long-Term rating at ‘AAA(lka)’. The Outlook is Stable.

CitiSL’s rating reflects the financial strength of Citibank N.A.’s (Citibank) given that CitiSL is a branch and part of the same legal entity as Citibank. Citibank is rated at ‘A’/Stable, which is higher than the sovereign’s Issuer Default Rating of ‘BB-’/Stable Outlook. Fitch believes that support from the head office would be forthcoming if required, subject to any regulatory constraints on remitting money into Sri Lanka.

CitiSL’s capitalisation has historically remained strong, with equity to assets and tier one capital ratios at 32% and 23.4% respectively at end-June 2012 (2011: 30%, 33.7%). Despite high repatriation in 2011 in lieu of not repatriating dividends from 2005 to 2007, CitiSL’s capitalisation has remained higher than peers and well over regulatory requirements.

CitiSL has maintained sound asset quality with no non-performing loans since 2009.

This is mainly due to CitiSL’s selective lending to large tier one corporates, multinationals and public sector entities, which are of high creditworthiness within Sri Lanka. CitiSL follows Citibank’s global credit policy, with significant oversight by Citibank’s regional offices in India and in Hong Kong.

The bank has significant loan concentration with the apparel sector accounting for 44% of loans and the financial sector at 15% at end-2011. At end-H112 its five largest loans and deposits accounted for 44% and 36% respectively of the bank’s total.

Citibank established local operations in 1979, and operates through a single branch.