Sri Lanka’s NDB downgraded to ‘B’

ECONOMYNEXT – Sri Lanka’s National Development Bank’s rating has been downgraded to ‘B’ from ‘B+’ with a stable outlook at the lower level, based on weaker capital to back recent credit growth, Standard and Poor’s, a rating agency said.

"The downgrade reflects our view that NDB’s weakened capital position is unlikely to improve over the next 12 months," said S&P Global Ratings credit analyst Amit Pandey said.

"Accordingly, we have lowered our assessment of the bank’s stand-alone credit profile (SACP) to ‘b’ from ‘b+’.

S&P said NDB’s capital and earnings profile had become weak. The rating agency had earlier expected it to raise capital, which would strengthen its risk adjusted capital to above 5.0 percent, after it dropped to 4.9 percent in December 2015.

The bank was unlikely to raise capital in the next 12-month due to recent management changes.

But NDB’s outlook was stable.

"The stable outlook over the next 12 months reflects our view that NDB is relatively insulated compared to peers from potential heightening of economic risks facing all financial institutions operating in Sri Lanka," Pandey said.

"Although we expect no rating movement in the next one year, rating upside will outweigh downside risks over the longer term."

S&P expected NDB to have satisfactory revenue diversification over the next 12 months and it had a adequate risk position for its size and business scale.

"However, the bank’s aggressive growth and small branch network has resulted in a below-average–albeit improved–funding profile."





NDB’s credit would be upgraded if new capital was raised, the rating agency said. (Colombo/Dec09/2016)

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