(The following statement was released by the rating agency)COLOMBO/SINGAPORE, October 23 (Fitch) Fitch Ratings has affirmed Standard Chartered Bank, Sri Lanka Branch's (SCBSL) National Long-Term Rating at 'AAA(lka)'. The Outlook is Stable.The rating action follows the affirmation of Standard Chartered Bank's (SCB) Long-Term Issuer Default Rating (IDR) at 'AA-' with Stable Outlook on 23 October 2013 (see related rating action commentary atwww.fitchratings.com ).KEY RATING DRIVERSSCBSL's rating is at the highest end of the National Rating scale and reflects the credit profile and financial strength of the head office SCB. The rating is tied to SCB's IDR because of SCBSL's legal status as a branch of SCB and because both are part of the same legal entity. SCB's rating is higher than Sri Lanka's Long-Term Local and Foreign Currency IDRs of 'BB-'/Stable, and as a result, SCBSL's rating on the National Rating scale is mapped to 'AAA(lka)'. SCBSL's appeal against the fine of LKR27bn imposed by the Exchange Control Department for alleged violation of exchange control laws was annulled in H113. Fitch expects SCBSL's lending to remain focused on its existing customer base. SCBSL's loan book contracted 7% in H113 after expanding 18% in 2012, reflecting the drop in lending seen across the banking sector. Consequently, loans decreased to 43.5% of assets from 55.8%. Fitch believes that SCBSL's strong asset quality is likely to continue to be supported by its concentration in corporate lending, mainly to top-tier local corporates. Corporate loans accounted for 73% of its total loans at end-2012. Non-performing loans (including interest in suspense) remained at under 1% of loans at H113, even though there was an increase in NPLs from consumer lending, including credit card advances, which account for 6% of loans.SCBSL's Fitch Core Capital ratio (FCC) remained high at 21.6% in H113 (2012:19.5%), similar to other foreign bank branches. Profitability, measured as a ratio of pre-impairment operating profit to average total assets, decreased to 5.8% in H113 from 6.4% in 2012, largely because of a contraction in net interest margin. Profitability nonetheless remained healthy compared with local peers. RATING SENSITIVITIESA downgrade of SCBSL's rating could result if SCB's rating were to fall below Sri Lanka's IDRs. Any changes to Fitch's expectations of parental support could be negative for the rating. SCB has had operations in Sri Lanka since 1892, and SCBSL is the country's second-largest foreign bank branch. Contacts:Primary AnalystNatasha AllesAnalyst+941 1254 1900Fitch Ratings Lanka Limited#15-04 East Tower, World Trade CenterColombo 01, Sri LankaSecondary AnalystRukshana ThalgodapitiyaVice President+941 1254 1900Committee ChairpersonSabine BauerSenior Director+ 852 2263 9966Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(lka)' for National ratings in Sri Lanka. Specific letter grades are not therefore internationally comparable.Additional information is available atwww.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15 August 2012, 'National Ratings Criteria', dated 19 January 2011, and 'Rating Financial Institutions above the Local Currency Sovereign Rating' dated 20 December 2011, are available atwww.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteriahttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181 National Ratings Criteriahttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885 Rating Financial Institutions Above the Local Currency Sovereign Rating ?? Effective Dec. 20, 2011 to Dec. 11, 2012http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657925 Additional Disclosure Solicitation Statushttp://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=805853 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
(Repeat for additional subscribers)
Oct 23 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Standard Chartered Bank, Sri Lanka Branch's (SCBSL) National Long-Term Rating at 'AAA(lka)'. The Outlook is Stable.
The rating action follows the affirmation of Standard Chartered Bank's
KEY RATING DRIVERS
SCBSL's rating is at the highest end of the National Rating scale and reflects the credit profile and financial strength of the head office SCB. The rating is tied to SCB's IDR because of SCBSL's legal status as a branch of SCB and because both are part of the same legal entity. SCB's rating is higher than Sri Lanka's Long-Term Local and Foreign Currency IDRs of 'BB-'/Stable, and as a result, SCBSL's rating on the National Rating scale is mapped to 'AAA(lka)'.
SCBSL's appeal against the fine of LKR27bn imposed by the Exchange Control Department for alleged violation of exchange control laws was annulled in H113. Fitch expects SCBSL's lending to remain focused on its existing customer base. SCBSL's loan book contracted 7% in H113 after expanding 18% in 2012, reflecting the drop in lending seen across the banking sector. Consequently, loans decreased to 43.5% of assets from 55.8%.
Fitch believes that SCBSL's strong asset quality is likely to continue to be supported by its concentration in corporate lending, mainly to top-tier local corporates. Corporate loans accounted for 73% of its total loans at end-2012. Non-performing loans (including interest in suspense) remained at under 1% of loans at H113, even though there was an increase in NPLs from consumer lending, including credit card advances, which account for 6% of loans.
SCBSL's Fitch Core Capital ratio (FCC) remained high at 21.6% in H113 (2012:19.5%), similar to other foreign bank branches. Profitability, measured as a ratio of pre-impairment operating profit to average total assets, decreased to 5.8% in H113 from 6.4% in 2012, largely because of a contraction in net interest margin. Profitability nonetheless remained healthy compared with local peers.
RATING SENSITIVITIES
A downgrade of SCBSL's rating could result if SCB's rating were to fall below Sri Lanka's IDRs. Any changes to Fitch's expectations of parental support could be negative for the rating.
SCB has had operations in Sri Lanka since 1892, and SCBSL is the country's second-largest foreign bank branch.
((Bangalore Ratings Team, Hotline: +91 80 6677 2513, Bhanu.priya@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Bhanu.Priya.reuters.com@reuters.net))
Keywords: Fitch Affirms Standard Chartered Bank Sri Lanka Br
