Bank Trends

Aug 04, 2008 (LBO) - Fitch Ratings has confirmed the 'AAA(lka)' national long-term rating of HSBC Sri Lanka with a stable outlook. The ratings agency said in a statement that the bad loans of the bank, the island's largest foreign bank, had increased but that its asset quality was high by Sri Lankan standards.

Fitch said the bank's loan growth had slowed last year but recovered in the first quarter of this financial year.

Profitability also fell last year despite high net interest margins because of higher loan loss provisions and a higher effective taxation, although its performance had improved by the latest quarter.

"HSBC Sri Lanka's loan growth slowed considerably in FY07 with a growth rate of just 6.

0 percent (from last year), which was well below the 16.5 percent growth witnessed by the domestic private Licensed Commercial Bank (LCB) sector," Fitch said.

But growth picked up in the first quarter of this financial year, with the bank's loan portfolio growing by 10.7 percent in the quarter.

The loan portfolio is fairly well diversified and covers both corporate and retail segments, which accounted for