(MCSL) with a stable outlook. The rating reflects the implied support assumed to be available from its ultimate parent, state-owned Bank of Ceylon (BOC, 'AA(lka)'), Sri Lanka's largest bank, the rating agency said in a statement.
"The agency takes considerable comfort from BOC's effective ownership of 88 percent, as well as board level linkages through common directors.
"However, MCSL's rating is constrained by poor solvency as indicated by the net Non-Performing Loan/ equity ratio.
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MCSL's portfolio expanded by 11 percent in the 2008 financial year, albeit over a small base, and shifted to a higher proportion of hire purchase (HP) reflecting the growth in HP across the industry due to its tax advantage.
"Asset quality has lagged that of its peers, stemming from a legacy of poor monitoring," Fitch said.
However, a fresh management team appointed during the financial year has adopted a more focused and hands-on approach to collections, it said.
"Reflecting these efforts, MCSL's gross NPL ratio (defined