Fitch affirms StanChart Sri Lanka at ‘AAA(lka)’

Fitch Ratings has affirmed Standard Chartered Bank, Sri Lanka Branch’s (SCBSL) national long- term rating at ‘AAA(lka)’. The outlook is stable.

SCBSL’s rating reflects the credit profile and financial strength of Standard Chartered Bank (SCB: A+/Stable). The rating is linked with SCB’s Issuer Default Rating (IDR) because of SCBSL’s legal status as a branch of SCB, which makes it part of the same legal entity.

SCB’s rating is higher than Sri Lanka’s long-term local- and foreign-currency IDRs of ‘B+/Negative’ and as a result, SCBSL’s rating is at the highest end of the national rating scale for Sri Lanka.
Fitch believes support from SCB would be forthcoming if required, subject to regulatory constraints on remitting money into Sri Lanka. The local branch represented 0.12 percent of SCB’s total assets at end-2015 and 1.4 percent of local banking sector assets at end-1H16.
Fitch expects the branch to maintain sufficient capitalisation to support its business plans despite regular profit repatriations. The branch’s Fitch core capital ratio remained high, at 23.6 percent, at end-June 2016 (2015: 25.5 percent).

Fitch expects SCBSL’s loan book to remain concentrated among top-tier corporate clients, despite its focus on building its retail book. Its business model has helped sustain better-than-industry asset-quality metrics, with a reported gross non-performing loan ratio of 0.35 percent at end-June 2016 (2015:0.40 percent).