Strategic Focus

Sept 17, 2013 (LBO) – Fitch Ratings said it had confirmed an ‘AAA(lka)’ domestic rating of Sri Lanka’s Citibank branch (CitiSL) with a stable outlook, amid a contracting loan book. Its loan book contracted by 18% in H113 and 9% in 2012, in contrast to loan expansion in the overall banking system, reflecting CitiSL’s focus on exposures that meet the group’s return parameters.

It is likely that even though most corporate exposures are booked on CitiSL’s balance sheet, its reported performance may not fully reflect its strategic importance to the group.

CitiSL funds its operations predominantly through corporate deposits and equity, and hence it is less dependent on intragroup funding. Fitch expects CitiSL to continue to repatriate profits because of its strong capital position, with equity-to-assets and Fitch core capital ratio standing at 38% and 43% respectively as at end-June 2013.

Rating Sensitivities

A downgrade of CitiSL’s rating could result if Citibank’s rating were to fall below Sri Lanka’s IDRs. Any changes to Fitch’s expectation of support from Citibank could also be negative for the rating.

Citibank established local operations in 1979, and opera