Fitch revises National Long Term Rating of NSB to AA+(lka) from AAA(lka)

Feb 18, 2019 (LBO) – Fitch Ratings has revised the National Long-Term Rating of National Savings Bank to ‘AA+(lka)’ from ‘AAA(lka)’ with a stable outlook following the recalibration of the Sri Lankan National Rating scale after the sovereign’s Long-Term Foreign-Currency Issuer Default Rating was downgraded.

The rating agency, however, said that the rating action is not related to NSB’s credit quality but reflects Fitch’s changes to the Sri Lankan national rating scale.

“The revision reflects the change in the relative ranking of NSB’s national rating compared with other Fitch-rated Sri Lankan issuers,” Fitch Ratings said.

“This is a result of the sovereign’s weakened ability to provide support to NSB, which acts as a constraint on the bank’s rating, even though the sovereign’s propensity to support the bank remains intact.”

The National Long-Term Rating of NSB continues to reflects Fitch’s expectation of extraordinary support from the sovereign due to the bank’s policy mandate of mobilising retail savings and investing them primarily in government securities, Fitch added.

The rating agency said NSB’s National Rating is sensitive to changes in the relative creditworthiness among Sri Lankan issuers and the level of the country’s sovereign rating.

“National scale ratings are a risk ranking of issuers in a particular market designed to help local investors differentiate risk,” Fitch Ratings said.

“Other Sri Lankan financial institutions’ national ratings, which are not mentioned in this commentary, have not been affected by the recalibration exercise.”

Sri Lanka’s national scale ratings are denoted by the unique identifier ‘(lka)’. Fitch adds this identifier to reflect the unique nature of the Sri Lankan national scale.

National scales are not comparable with Fitch’s international rating scales or with other countries’ national rating scales.