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Aug 29, 2011 (LBO) - HSBC Sri Lanka's 'AAA(lka)' rating has been confirmed by Fitch Ratings Lanka with a stable outlook based on the strength of its parent which has a rating higher than the island's sovereign rating. Fitch said HSBC Sri Lanka branch was part of the same legal entity of Hong Kong & Shanghai Banking Corporation Limited (HKB) with a 'AA'/Stable' rating which was higher than Sri Lanka's 'BB-' issuer default rating.

Fitch said HKB has demonstrated its support to the branch through capital infusions in the past and funding lines.

HSBC Sri Lanka's loan book had expanded 21.4 percent in 2010 and 16.4 percent in the six months to June 2011 backed by private sector credit demand.

Investments in government securities were 40 percent of assets in the first half. Corporate borrowers had 69 percent of loans and consumer credit was 31 percent (credit cards 14 percent, personal loans 11 percent).

HSBC is the largest issuer of credit cards in Sri Lanka.

"Credit concentrations persisted at end-2010, but stemmed from exposures to large global and local corporate," Fitch said.

Its gross non performing loans fell to 3.6 percent at end 2010 from 5.2 percent at end 2009.

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