Bank Rating

Nov 30, 2012 (LBO) - Fitch Ratings has confirmed a BB+(lka) rating of Sri Lanka's Union Bank with a negative outlook, saying the lender faced risks to asset quality from strong growth but it had strong capital ratios. "Significant improvements to its risk management system and processes, including effective implementation of a core banking system capable of supporting UB's expanding operations, and maintaining satisfactory asset quality, profitability, and capitalisation could result in the Outlook being revised to Stable," Fitch said.

"The bank is in the process of finalising the purchase of a core banking system and has also signed up for the purchase of a risk management system. UB's management expects to complete the system implementation by end-2013."

Unions Banks loans had growth 19 percent in the nine months to September 2012, compared with 72 percent in 2011, higher than the 17 percent seen in the sector but in line with similar sized bank, Fitch said.

The bank's gross non-performing loan (NPL) ratio had increased to 6.4 percent as at end September from 4.1 percent in end December 2011, driven by construction sector and retail customers, Fitch said.

The full statement is reproduced below: