Leasing Risks

Sept 02, 2008 (LBO) – Fitch Ratings says the underlying risks of Sri Lanka’s specialised leasing company sector have increased owing to high inflation and rising interest rates.

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While the larger firms are relatively more resilient to a continued deterioration in macro economic conditions, the smaller ones are more at risk, it said in a statement.

In addition to the escalation of market risk, credit and liquidity risks have also become concerns as delinquencies within the lease and hire purchase loan portfolios increase.

The three large firms Fitch rates – Lanka Orix Leasing Company (LOLC, A(lka)/Stable), People’s Leasing Company Limited (PLCL, A-(lka)/Stable), and Commercial Leasing Company PLC (CLC, A-(lka)/Stable), accounted for 56 percent of the sector at end-2007.

Fitch noted that these firms are “relatively more resilient to a continued deterioration in macro economic conditions, given their stronger risk management controls and systems, and better access to liquidity lines from commercial banks.”

However, Fitch said it believes that