Loss Transfer

Sept 03, 2009 (LBO) - Citibank Sri Lanka has transferred billions of rupees of losses from a defaulted derivative deal with a state-run oil retailer to a foreign unit and the local branch has retained its 'AAA(lka)' rating, Fitch Ratings said.

At end-December 2008, the top 20 loans had accounted for 93.

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1 percent of total loans.

"Despite concentration risk however, the bank's target clientele constitute relatively better credits, and its zero exposure to the consumer segment has meant that credit risk has historically remained low," Fitch said.


"Capital has historically remained high, boosted by high levels of profitability with no profit repatriation to the head office over the past 10 years.

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"

While Citi Sri Lanka maintained capital adequacy ratios above the minimum requirement at end 08, they were hurt by the oil derivative contracts which required a 150 percent risk weight owing to its classification as an NPL, Fitch said.

After the transfer of these dues, the Tier 1 capital adequacy stood at 23.


5 percent and total capital adequacy ratios stood at and 23.
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9 percent by June 2009.

Citi Sri Lanka's low NPLs at June, together with full provisions on these NPLs, meant that the net NPLs to equity ratio was zero b

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