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Sunday December 10th, 2023

Citibank Sri Lanka ‘AAA(lka)’ rating confirmed with zero bad loans

ECONOMYNEXT – Fitch Ratings has confirmed an ‘AAA(lka)’ given to Sri Lanka’s Citibank branch, which has zero bad loans from 2009.

“The affirmation of CitiSL’s rating reflects Fitch’s expectation of an extremely high probability of
support from its US-based head office – Citibank, N.A. (A+/Stable/a),” the rating agency said.

“The agency believes a default by the branch would pose a huge reputational risk to Citibank, N.A. as CitiSL is part of the same legal entity and they are highly integrated.

“CitiSL has maintained zero non-performing loans since 2009, reflecting the bank’s selective lending to top-tier local and multinational corporates and financial institutions.

“The bank’s above-average Fitch Core Capital ratio of 34.1% at end-March 2019 should support its growth aspirations despite regular profit repatriations.”

The full statement is reproduced below

Fitch Affirms Citibank N.A – Colombo Branch at ‘AAA(lka)’; Outlook Stable

Fitch Ratings-Colombo-04 October 2019:

Fitch Ratings Lanka has affirmed Citibank N.A. – Colombo Branch’s (CitiSL) National Long-Term Rating at ‘AAA(lka)’. The Outlook is Stable.

‘AAA(lka)’ National Long-Term Ratings denote the highest ratings assigned by Fitch on its national rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country.

Key Rating Drivers

The affirmation of CitiSL’s rating reflects Fitch’s expectation of an extremely high probability of support from its US-based head office – Citibank, N.A. (A+/Stable/a). The agency believes a default by the branch would pose a huge reputational risk to Citibank, N.A. as CitiSL is part of the same legal entity and they are highly integrated.

CitiSL’s rating reflects the credit profile and financial strength of Citibank, N.A. whose Issuer Default Rating (IDR) is higher than Sri Lanka’s Long-Term Local- and Foreign-Currency IDRs of ‘B’ with a Stable Outlook. As a result, CitiSL’s National Long-Term Rating is mapped to ‘AAA(lka)’, which is the highest end on the National Rating scale.

Fitch believes that support from Citibank, N.A. would be forthcoming if required, subject to any regulatory constraints on remitting money into Sri Lanka. The small size of the branch (its assets account for less than 1% of the total assets of Citibank, N.A.) implies that support, if any, would not be material to the head office.

The extremely high probability of support is underpinned by the alignment of CitiSL’s objectives and strong operational integration with Citigroup.

CitiSL has maintained zero non-performing loans since 2009, reflecting the bank’s selective lending to top-tier local and multinational corporates and financial institutions.

The bank’s above-average Fitch Core Capital ratio of 34.1% at end-March 2019 should support its growth aspirations despite regular profit repatriations.

RATING SENSITIVITIES

CitiSL’s rating could be downgraded if Citibank, N.A.’s rating falls below Sri Lanka’s IDR (B/Stable), although Fitch sees that as highly unlikely in the near to medium term. Significant changes to Fitch’s expectation of support from Citibank N.A. could also have a negative impact on the rating.
There is no rating upside for the National Long-Term Rating as it is already at the highest point on the scale.

Citibank N.A.- Colombo Branch; National Long Term Rating; Affirmed; AAA(lka); RO:

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ADB USD200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”
(Colombo/Dec9/2023)

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Sri Lank in blackout as power grid hit by cascading failure

ECONOMYNEXT – Sri Lanka suffered a blackout as Saturday evening as the state-run Ceylon Electricity Board grid was hit by a cascading power failure.

The cascading failure is believed to have been triggered by the failure of the Kothmale-Biyagama transmission line.

“The Ceylon Electricity Board wishes to inform our customers that due to the failure of Kotmale – Biyagama main transmission line, an island wide power failure has occurred,” CEB Spokesman Noel Priyantha said.

“Step by step restorations are underway and it may take few hours to completely restore the power supply.”

With hydro plants running flat out, a outage of the line tends to create a big imbalance in the demand and supply, leading to tripping of more lines and generators.

Lines can trip due to lightening strikes, or equipment failures.

Sri Lanka last suffered a cascading failure in December 2021, due to the failure of the same transmission line.

RelatedSri Lanka power blackout as grid hit by cascading failure

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Sri Lanka to host regional Food and Agriculture Organization conference

ECONOMYNEXT – Sri Lanka will host the 37th session of the Asia Pacific Regional Conference (APRC) of the United Nations Food and Agriculture Organization (FAO), from February 19-22, 2024 in Colombo.

The Conference will bring together agriculture ministers and officials from 46 countries across the region to discuss challenges in food and agriculture.

“The 37th APRC will provide a vital platform for regional collaboration, benefitting the agricultural landscape, fisheries sector and environment of Sri Lanka,” Minister Mahinda Amaraweera said at a press briefing on Friday (8) to announce the conference.

FAO has had an active presence in Sri Lanka for over 40 years. “FAO has supported the country in the implementation of Good Agricultural Practices (GAP), and the development of the fisheries sector for growth and climate resilience,” Vimlendra Sharan, FAO Representative for Sri Lanka and the Maldives said.

“The APRC conference will be an opportunity to highlight the innovative approaches introduced in partnership with the government.”

By hosting APRC, Sri Lanka hopes to demonstrate the country’s dedication to the growth of sustainable agriculture, and showcase its commitment to sustainable agricultural development.

The APRC agenda will include a forum on agritourism, especially requested by the Sri Lankan government.
(Colombo/Dec9/2023)

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