Fitch confirms Citibank Sri Lanka unit at ‘AAA(lka)’

ECONOMYNEXT – Fitch Ratings said it has confirmed Citibank N.A. Colombo Branch’s (CitiSL) National Long-Term Rating at ‘AAA(lka)’ with a stable Outlook.

 

“CitiSL has consistently maintained sound asset quality with zero non-performing loans since 2009,” a statement said.

As a result of CitiSL’s stringent customer evaluation framework, its loan book is significantly concentrated, with the five largest loans accounting for 54 percent of total lending at end-1H16, it said.

The full rating statement follows:

Fitch Ratings-Colombo-01 September 2016: Fitch Ratings has affirmed Citibank N.A.- Colombo Branch’s (CitiSL) National Long-Term Rating at ‘AAA(lka)’. The Outlook is Stable.

CitiSL’s rating is the highest on the National Rating scale and reflects the credit profile and financial strength of Citibank, N.A. (A+/Stable). Citibank, N.A.’s rating is higher than Sri Lanka’s Long-Term Local- and Foreign-Currency Issue Default Ratings of ‘B+/Negative’, and as a result CitiSL’s rating on the National Rating scale is mapped to ‘AAA(lka)’.

 The rating is linked with Citibank, N.A.’s Issuer Default Rating (IDR) because of CitiSL’s legal status as a branch of Citibank, N.A., which makes it a part of the same legal entity. Fitch believes that support from Citibank, N.A. would be forthcoming if required, subject to any regulatory constraints on remitting money into Sri Lanka.

CitiSL’s strategic objectives are aligned with those of Citigroup. The branch is integrated into global operations through utilisation of common systems, such as group’s core banking and anti-money laundering systems, and through regular reporting, including periodic internal audits.

As a result of CitiSL’s stringent customer evaluation framework, its loan book is significantly concentrated, with the five largest loans accounting for 54% of total lending at end-1H16. Further, CitiSL has consistently maintained sound asset quality with zero non-performing loans since 2009.

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The contribution of deposits to the bank’s funding mix has declined to 71% at end-1H16 from 86% at end-2015. However, Fitch believes that CitiSL’s liquidity position is stable as the branch has access to intergroup funding, if needed. CitiSL’s Fitch Core Capital (FCC) ratio remains around 46.7% at end-1Q16 and the branch’s FCC ratio is much higher than that of its domestic peers.

CitiSL was established in 1979 and operates as a single branch in Sri Lanka.

RATING SENSITIVITIES

A downgrade of CitiSL’s rating could result from Citibank, N.A.’s rating falling below Sri Lanka’s IDR, 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.

 

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