Deposit Franchise

Oct 22, 2009 (LBO) – RAM Ratings Lanka said it has assigned long- and short-term financial institutions rating of A and P1 to Sri Lanka’s State Mortgage and Investment Bank (SMIB). “The ratings are primarily based on the state ownership of the bank, tempered by the wide asset-liability maturity mismatch (ALMM) inherent in its business model,” the rating agency said in a statement.

SMIB is a licensed specialised bank created by the government following the amalgamation of two state-owned banks.

SMIB, which comes under the purview of the Ministry of Finance and Planning, is only permitted to disburse loans for housing, agriculture or for industry.

It is a medium-sized bank that accounted for 3.34% of the industry’s assets as at end-December 2008, and has limited geographic reach; of its 13 branches, 6 are in the western province.

SMIB has been aggressively expanding its loan portfolio in the past 2 years, despite the weakening macroeconomic environment, RAM Ratings said.

The bank’s loan portfolio consists of housing loans collateralised either by property or by the Employees’ Provident Fund (EPF).

EPF-backed loans took up 42.77% of SMIB’s