Aug 18 (LBO) – Fitch Ratings Lanka said it has confirmed Standard Chartered Bank, Sri Lanka Branch’s (SCBSL) National Long-term rating at ‘AAA(lka)’ with a stable outlook. “SCBSL’s rating reflects Standard Chartered Bank’s (SCB) financial strength, of which SCBSL is a branch and part of the same legal entity,” Fitch said in a statement.
SCB is rated ‘A+’/Stable, which is higher than the sovereign’s foreign currency Issuer Default Rating of ‘B+’/Stable.
SCBSL accounted for 0.2 percent of SCB’s total assets at the end of the 2009 financial year.
Fitch said the period between 2008 and the first half of 2010 was a “challenging period” for the Sri Lanka branch.
This was “owing to the past dues on oil derivative contracts which were adversely impacting SCBSL’s profitability and capital adequacy, thereby constraining its loan growth.”
In FY08, SCBSL entered into oil derivative contracts with state-owned Ceylon Petroleum Corporation (CPC).
All the contracts were hedged with back-to-back contracts with the SCB head office.
In December 2008, CPC suspended payments on these contracts, pending an inquiry by the Monetary Board of Sri Lanka.