"However, return on assets (ROA) saw a marked decline over the 15-month period to end-September 2009 due to branch expansion and rising NPLs (non-performing loans)."
Yet, Fitch said it recognises that the current rapid decline in funding costs, driven by falling market interest rates, should outweigh any further increases in credit costs.
This could improve profitability in the short to medium-term, Fitch said, adding however that the rating is constrained by SFC's relatively less diversified funding streams.
Like the registered finance company (RFC) sector, SFC's loan portfolio primarily consists of vehicle finance for lower-value commercial vehicles, which cater to the riskier small and medium enterprise (SME) segment.
Loan growth reduced to just 2.2 percent at the end of the 2009 financial year compared with average growth of 41.3 percent in