Fitch Ratings has affirmed the ratings of ten finance companies.They are,People’s Leasing & Finance (PLC), Central Finance Company (CF), Melsta Regal Finance (MRF), HNB Grameen Finance (HGL), LB Finance (LB), Siyapatha Finance (Siyapatha), Senkadagala Finance (Senka), AMW Capital Leasing and Finance (AMCL), Singer Finance (SFL) and Mercantile Investment & Finance (MIF).
The rating actions follow Fitch’s periodic review of the large and midsized finance companies in Sri Lanka.
The companies in the peer group remain predominantly exposed to vehicle financing.
Fitch expects growth potential in the vehicle financing segment to be limited due to the increase in import tariffs for cars and the central bank’s imposition of a 70% cap on loan to value ratio for loans extended for the purpose of acquiring or using motor vehicles.
Fitch expects asset quality and capitalisation to deteriorate in the sector following aggressive loan book growth in recent years and challenging operating conditions, which were signaled in Fitch’s downgrade of Sri Lanka’s sovereign rating to ‘B+’ from ‘BB’ in February 2016.
Fitch’s ratings on the finance companies in the peer group are driven by their business model and franchise, and their risk appetite, which is reflected in their exposure to more vulnerable customer segments.
Finance Companies with Institutional Support Driven Long Term Ratings PLC’s Issuer Default Rating (IDR) and National Long Term Rating continue to reflect Fitch’s view that PLC’s parent, the state owned and systemically important People’s Bank (AA+(lka)/Stable), would provide extraordinary support to PLC, if required.
People’s Bank’s propensity to support PLC stems from its 75% shareholding in PLC, common brand and PLC’s position as a “strategic subsidiary” of the bank.
The negative Outlook on the IDR mirrors that on the sovereign’s. Fitch maintains a Stable Outlook on the National Long Term Rating, in line with that of People’s Bank, as this is a measure of relative strength between issuers within Sri Lanka.
The rating actions follow Fitch’s periodic review of the large and midsized finance companies in Sri Lanka.
The companies in the peer group remain predominantly exposed to vehicle financing.
Fitch expects growth potential in the vehicle financing segment to be limited due to the increase in import tariffs for cars and the central bank’s imposition of a 70% cap on loan to value ratio for loans extended for the purpose of acquiring or using motor vehicles.
Fitch expects asset quality and capitalisation to deteriorate in the sector following aggressive loan book growth in recent years and challenging operating conditions, which were signaled in Fitch’s downgrade of Sri Lanka’s sovereign rating to ‘B+’ from ‘BB’ in February 2016.
Fitch’s ratings on the finance companies in the peer group are driven by their business model and franchise, and their risk appetite, which is reflected in their exposure to more vulnerable customer segments.
Finance Companies with Institutional Support Driven Long Term Ratings PLC’s Issuer Default Rating (IDR) and National Long Term Rating continue to reflect Fitch’s view that PLC’s parent, the state owned and systemically important People’s Bank (AA+(lka)/Stable), would provide extraordinary support to PLC, if required.
People’s Bank’s propensity to support PLC stems from its 75% shareholding in PLC, common brand and PLC’s position as a “strategic subsidiary” of the bank.
The negative Outlook on the IDR mirrors that on the sovereign’s. Fitch maintains a Stable Outlook on the National Long Term Rating, in line with that of People’s Bank, as this is a measure of relative strength between issuers within Sri Lanka.
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