Fitch downgrades ratings of state banks, finance and insurance companies

Mar 02, 2016 (LBO) – Fitch Ratings has downgraded the Issuer Default Ratings of two state banks and one finance company, a statement said. Accordingly, Bank of Ceylon and National Savings Bank has been downgraded to 'B+' from 'BB-' and People's Leasing & Finance to 'B' from 'B+'. The ratings of DFCC Bank were affirmed at 'B+'. It has also downgraded the insurer financial strength rating of Sri Lanka Insurance Corporation to 'B+' from 'BB-'. The outlooks on all the ratings have been set to negative to reflect the negative outlook on the sovereign. Fitch took the rating actions after it downgraded the Sri Lankan sovereign to 'B+' from 'BB-' and assigned a Negative Outlook on 29 February 2016. Fitch has also assigned Recovery Ratings of 'RR4' to the US dollar senior unsecured notes issued by BOC and NSB to reflect average recovery prospects. At the same time Fitch affirmed the Recovery Rating on DFCC's US dollar senior unsecured notes at 'RR4'. The National Ratings of BOC, NSB, DFCC and PLC have not been reviewed at this time. “Fitch has maintained a stable sector outlook for the Sri Lankan banking sector for 2016 as we do not expect the sector's credit profile to deteriorate materially even though operating conditions could become more challenging,” the agency said. “The operating environment remains a key rating driver for the Sri Lankan banking sector given its potential volatility.” Fitch Ratings said. Earlier in the day, Fitch downgraded SLT’s long term foreign and local currency issuer default ratings to ‘B+ from ‘BB-‘ and SriLankan Airlines’s US dollar-denominated government-guaranteed bonds to ‘B+’ from ‘BB-‘.