Saturday Jan 25, 2025
Saturday Jan 25, 2025
Saturday, 25 January 2025 01:03 - - {{hitsCtrl.values.hits}}
Fitch Ratings has upgraded the National Long-Term Ratings of 10 Sri Lankan banks this week following the recent sovereign upgrade and recalibration of the agency’s Sri Lankan national rating scale. At the same time, Fitch has affirmed the National Long-Term Ratings of five Sri Lankan banks.
The recalibration reflects changes in the relative creditworthiness of Sri Lankan issuers after Fitch upgraded Sri Lanka’s Long-Term Local-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC-’ on 20 December 2024. Fitch typically does not assign Outlooks to sovereigns with a rating of ‘CCC+’ or below.
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”, dated 16 January 2025.
The banks’ National Ratings consider their creditworthiness relative to other issuers in the country. The recalibration of the Sri Lankan National Rating scale has resulted in upgrades of the National Long-Term Ratings of the following banks. The outlooks remain stable.
Fitch upgrades 10 Sri Lankan banks’...
• Bank of Ceylon (BOC) to ‘AA- (lka)’, from ‘A (lka)’
• People’s Bank (Sri Lanka) (PB) to ‘AA- (lka)’, from ‘A (lka)’
• Commercial Bank of Ceylon PLC (COMB) to ‘AA- (lka)’, from ‘A (lka)’
• Hatton National Bank PLC (HNB) to ‘AA- (lka)’, from ‘A (lka)’
• Sampath Bank PLC to ‘AA- (lka)’, from ‘A (lka)’
• Seylan Bank PLC to ‘A+ (lka)’, from ‘A- (lka)’
• DFCC Bank PLC to ‘A (lka)’, from ‘A- (lka)’
• National Development Bank PLC (NDB) to ‘A (lka)’, from ‘A- (lka)’
• Nations Trust Bank PLC (NTB) to ‘A (lka)’, from ‘A- (lka)’
• Pan Asia Banking Corporation PLC (PABC) to ‘BBB (lka)’, from ‘BBB- (lka)’
Key rating drivers
The national rating upgrades are driven by the upgrade of the sovereign’s Long-Term Local-Currency IDR and the recalibration of the national rating scale. The ratings reflect the relative creditworthiness of Sri Lankan issuers. We believe the sovereign’s credit profile improvement has alleviated sovereign-related stresses on the banks’ operating environment (OE) of ‘ccc+’/stable as well as on financial and non-financial factors, due to the strong link between the sovereign’s financial health and the banks’ credit profiles.
The negative outlook on UB reflects the potential for its capital buffers to deplete relative to similarly rated peers, alongside the loan book expansion we expect as it pursues market share growth.
The affirmation of CBL’s National Rating underpins Fitch’s view that extraordinary support would be forthcoming from the ultimate parent, CT Holdings PLC, if needed. The negative outlook reflects downside risks from its increasing size relative to that of its ultimate parent, which could constrain the parent’s ability to provide support in times of need.
The affirmations of the national ratings of Amana, UB, SDB and HDFC reflect the unchanged relative creditworthiness of these banks compared to other Fitch-rated Sri Lankan entities following the recalibration.
