The rating also derives comfort from the experience and effectiveness of the bank's management and its relatively good risk management framework.
In line with its strategy of selective acquisition, on Jan. 1, NTB merged with specialised leasing company MLL.
The merger, effected through a share swap, boosted the bank's capital base to over 2 billion rupees, which helped NTB meet Central Bank's minimum capital requirement of 2.5 billion rupees.
The merger also helps the bank to diversify income streams and faster access to a high margin product. The leasing operation functions as a separate business unit of NTB under the brand name of "Nations Leasing".
NTBs exposure to the consumer segment has steadily increased subsequent to a strategic review carried out by the Boston Consultancy Group in 2003.
Fitch views the higher presence of the bank within this segment as evidence of its adherence to this strategy.
Consumer assets consisting mainly of personal loans, credit card advances and housing loans constituted 36 percent of loans in FY05. The American Express credit card issued by the bank has gained considerable acceptance, with credit card advances accounting for 11 percent of loans in FY05.
NTBs gross non-performing loan ("NPL") ratio of 4.8 percent compares well with peers, but Fitch notes that the asset quality within the leasing and credit card portfolios is less favourable.
"The bank needs to fully integrate the leasing operation into its credit culture and better monitor credit card receivables, particularly given its focus on growing consumer assets," the risk evaluator said.
NTB is a relatively young commercial bank established in 1999 with the acquisition of the Sri Lankan branch of Overseas Trust Bank.
The bank was promoted by the John Keells group (rated 'AAA(lka)') and the Central Finance group (rated 'A+(lka)'), together with the International Finance Corporation (IFC).
The promoters (with the exception of the IFC) collectively hold 49.9 percent of NTBs equity. With a 1.7 percent share of banking system assets as at FYE05, the bank ranks as Sri Lanka's sixth-largest private commercial bank.