July 08, 2008 (LBO) – Fitch Ratings has confirmed the local long-term rating of Sri Lanka’s Nations Trust Bank at ‘A(lka)’ with a stable outlook. The agency also gave an ‘A-(lka)’ rating to NTB’s proposed unsecured debenture issue of up to 1.5 billion rupees.
“NTB’s rating reflects its modest profitability and capitalization,” it said in a statement.
NTB’s return on assets held steady at end-Q108 despite higher provisions and rising operating costs, with a higher net interest margin and fee-based income.
The higher net interest margin was due to an equity infusion in the form of a rights issue of 1.05 billion rupees in the first quarter of 2008, along with an increase in lending rates.
“However, NTB’s overall profitability is likely to be constrained over the short-to-medium term given the slowing economic environment and inflationary cost pressures,” Fitch said.
NTB derived around 27 percent of its total income from its credit card business in FY07, up from 24 percent in FY06.
The bank is the exclusive franchisee for American Express credit cards in Sri Lanka and ranks second in terms of total card spend among