Citibankâ€™s Sri Lanka unit maintains zero bad loans record, retains ‘AAA(lka)’ rating
ECONOMYNEXT – Fitch Ratings Lanka said it has confirmed Citibank N.A. – Colombo Branch’s national long-term rating at ‘AAA(lka)’ with a stable outlook.
Citibank N.A. – Colombo Branch’s rating reflects the credit profile and financial strength of its head office, Citibank, N.A., rated A+/Stable/a, a statement said.
The Sri Lanka unit of Citibank has maintained its record of zero non-performing loans since 2009, it said.
The full rating report follows:
Fitch Ratings-Colombo-29 March 2019: Fitch Ratings Lanka has affirmed Citibank N.A. – Colombo Branch’s (CitiSL) National Long-Term Rating at ‘AAA(lka)’. The Outlook is Stable.
Key Rating Drivers
CitiSL’s rating reflects the credit profile and financial strength of its head office – Citibank, N.A. (A+/Stable/a). It also reflects Fitch’s expectation of continued strong support from the head office as CitiSL is a branch of Citibank, N.A. and hence, forms part of the same legal entity. The small size of the branch (less than 1% of the total assets of Citibank, N.A.) implies that support, if any, would not be material to the head office.
Citibank, N.A.’s Issuer Default Rating (IDR) is higher than Sri Lanka’s Long-Term Local- and Foreign-Currency IDRs of ‘B’ with Stable Outlook and 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 high probability of support is underpinned by CitiSL’s strong operational integration with Citigroup through the use of common systems and regular reporting. The branch’s strategic objectives are also aligned with those of the group.
CitiSL maintained its record of zero non-performing loans since 2009, reflecting its stringent credit evaluation framework. The branch’s selective lending to top-tier local corporations, financial institutions and multinational corporates explains its highly concentrated loan book.
We expect CitiSL to maintain above industry-average capitalisation to support its business plans.
CitiSL’s Fitch Core Capital ratio declined to 34.9% by end-3Q18 from 42.2% at end-2017 owing mainly to a steep capital charge for foreign exchange volatility, but remained high, compared with Fitch-rated peers.
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 scope for upward rating action on the National Long-Term Rating as it is already at the highest point on the scale.
(COLOMBO, April 02, 2019-SB)