Mar 08, 2010 (LBO) – Fitch Ratings Lanka said it removed People’s Merchant Bank’s National Long-term rating from Rating Watch Negative and downgraded the rating to ‘BB+(lka)’ from ‘BBB-(lka)’. The rating agency said in a statement it also assigned PMB a Negative Outlook.
“The rating actions reflect PMB’s weakened financial profile in terms of its profitability, asset quality and solvency,” Fitch said.
But Fitch said it takes comfort in PMB’s main shareholder, the state-owned People’s Bank which has a ‘A(lka)’ rating, and holds 39 percent of PMB’s equity and has board level linkages with it.
PMB’s gross non-performing loan (NPL) ratio rose sharply to 29.2 percent at the third quarter of the 2010 financial year, stemming mainly from a significant increase in delinquencies in its loan portfolio.
The gross NPL ratio for the group stood at 31.2 percent, which was compounded by the poor asset quality of its subsidiary, People’s Merchant Finance Company, formerly Silvereen Finance Company, a troubled, small family-held registered finance company acquired by PMB.
PMB is currently awaiting approval from the Central Bank to merge with PMF, and become a registered finance compan