Saturday Jan 25, 2025
Saturday Jan 25, 2025
Saturday, 25 January 2025 00:58 - - {{hitsCtrl.values.hits}}
Fitch Ratings has upgraded the National Long-Term Ratings of 10 Sri Lankan non-bank financial institutions (NBFIs) and affirmed the ratings of eight. This comes after the agency’s Sri Lankan National Rating scale was recalibrated to reflect changes in relative creditworthiness among the country’s issuers following the upgrade of Sri Lanka’s Long-Term Local-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC-’ on 20 December 2024.
Rating actions on NBFIs with National Long-Term Ratings that are driven by their standalone profiles:
Fitch upgrades 10 Sri Lankan NBFIs’...
Rating actions on bank-supported NBFIs, following the actions on their parent banks. Please see “Fitch Upgrades 10 Sri Lankan Banks’ National Ratings and Affirms Five after Scale Recalibration”, published 21 January 2025:
- People’s Leasing & Finance PLC (PLC) upgraded to ‘A (lka)’ from ‘A- (lka)’; outlook stable
- CBC Finance Ltd. (CBCF) upgraded to ‘A (lka)’ from ‘BBB+ (lka)’; outlook stable
- HNB Finance PLC (HNBF) upgraded to ‘A (lka)’ from ‘BBB+ (lka)’; outlook stable
- Siyapatha Finance PLC upgraded to ‘A (lka)’ from ‘BBB+ (lka)’; outlook stable
- Merchant Bank of Sri Lanka & Finance PLC (MBSL) upgraded to ‘A (lka)’ from ‘BBB+ (lka); outlook stable
- UB Finance PLC (UBF) affirmed at ‘BB (lka)’; outlook remains negative
Actions on the shareholder support-driven National Long-Term Ratings of local corporate-owned NBFIs: Please see “Fitch Upgrades 7, Revises 2 Sri Lankan Non-Financial Corporates’ Ratings on National Scale Revision”, published 22 January 2025:
- Abans Finance PLC (AFP) upgraded to ‘A-(lka)’/Stable from ‘BBB+ (lka)’/Negative
- Singer Finance (Lanka) PLC (SFP) upgraded to ‘BBB+ (lka)’ from ‘BBB (lka)’; outlook stable
- Dialog Finance PLC (DF) affirmed at ‘AA (lka)’; outlook stable
- Richard Pieris Finance Ltd. (RPF) affirmed at ‘A (lka)’; Outlook revised to Stable from Negative
- AMW Capital Leasing And Finance PLC (AMWCL) affirmed at ‘BBB (lka)’; Outlook remains Negative
- Senfin Asset Management Ltd. affirmed at ‘BBB-(lka)’; outlook stable
A full list of rating actions is below.
The National Ratings of other Sri Lankan NBFIs, which are not mentioned in this commentary, have not been affected by the recalibration.
National scale ratings are a risk ranking of issuers in a particular market designed to help local investors differentiate risk. Sri Lanka’s national scale ratings are denoted by the unique identifier ‘(lka)’. Fitch adds this identifier to reflect the unique nature of the Sri Lankan national scale. National scales are not comparable with Fitch’s international rating scales or with other countries’ national rating scales. For details, see “Fitch Ratings Recalibrates Sri Lanka’s National Rating Scale”, published 16 January 2025.
Key rating drivers
The rating actions on CF, LB and Fintrex, whose ratings are driven by their standalone profiles, reflect the effect of the sovereign rating upgrade and improving operating environment on their standalone credit profiles, as well as the relative strength of their credit profiles compared with that of other entities rated on the Sri Lankan National Rating Scale following the recalibration. The affirmation of the National Ratings of CDB, Senka and MIF indicate that their creditworthiness relative to that of other Fitch-rated standalone Sri Lankan entities has not changed following the recalibration.
The rating actions on NBFIs that are supported by a shareholder – bank or corporate – are driven by Fitch’s assessment of their parents’ relative credit profiles after the national rating scale recalibration. This is because these entities’ national ratings continue to reflect Fitch’s expectation of extraordinary support from their respective parents, underpinned by the parents’ stakes in the finance subsidiaries and the degree of integration and role in the group, and shared branding in some cases. As such, the parents’ credit profiles are anchors to the subsidiaries’ ratings, which indicate the parents’ ability to provide extraordinary support to their subsidiaries in times of need.
The upgrade of PLC’s national rating reflects our expectation of extraordinary support from People’s Bank (Sri Lanka) (PB, AA- (lka)/Stable), stemming from the parent’s credit profile improvement following the alleviation of sovereign-related stresses. We assess that PLC’s support-driven rating is two notches below PB’s rating, considering its relative size to PB, which exceeds its standalone credit profile and drives PLC’s national rating.
The affirmation of the National Ratings of UBF, DF, RPF, AMWCL and Senfin reflects Fitch’s view that shareholder support remains unchanged. The rating action on SFP also considers its growing size relative to its parent, which may weigh on the parent’s ability to provide support.
RPF’s outlook revision to stable from negative and AFP’s upgrade with a stable outlook reflect our view of abating downside risks to parental support due to the parents’ stabilising credit profiles as well as RPF’s and AFP’s enhanced financial performance. UBF’s and AMWCL’s ratings remain on negative outlook, reflecting the pressure on their parents’ credit profiles.
