Lease Rating

Nov 17, 2008 (LBO) – Fitch Ratings Lanka has confirmed People’s Leasing Company (PLC) national long-term rating at ‘A-(lka)’ with a stable outlook, but warned its aggressive loan growth was a concern. It also confirmed the ‘BBB+’ rating on PLC’s proposed unsecured subordinated debenture issue of up to a billion rupees, and the ‘F1’ short-term issue rating on the short-term debenture of which 112.5 million rupees is outstanding.

Fitch said the ratings factor in PLC’s good access to local institutional funding, and the benefits derived from its parent, the state-owned People’s Bank (PB, ‘A-(lka)’ (A minus(lka))/Positive Outlook).

PLC accounted for over 23 percent of People Bank’s group profits at end-December 2007.

“PLC’s aggressive loan growth under the present challenging economic conditions is a rating concern,” Fitch Ratings Lanka said in a statement.

It said that PLC’s pre-provision return on assets (ROA) at an annualised 8.48 percent at the end of the first quarter of the 2009 financial year has consistently compared well against its peers.

This was due to its healthy net interest margin (NIM) driven by high interest yields, and a more cost-efficient operation.