Dec 19, 2013 (LBO) – Fitch Ratings has downgraded Sri Lanka’s Union Bank of Colombo Plc by one notch to ‘BB(lka)’ on rising non-performing loans. The outlook was revised to stable from negative at the lower rating.

“The downgrade reflects the deterioration in UB’s credit profile, in terms of its asset quality and capitalisation,” the rating agency said.

“Fitch has taken into consideration UB’s increasing risk appetite, which can be seen in its rapidly expanding operations despite delays in implementing a core banking system.

“Fitch believes that although UB is on track to resolve operational weaknesses, it is likely to take some time until tangible benefits from stronger risk management and more robust internal reporting feed through.”

Union Bank has increased loan growth 16 percent in the first nine months of the year above the sector 5.2 percent rate. Non-performing loans had increased 27 percent increasing NPLs to gross loans ratio of 13 percent from 12 percent at the end of 2012.

Its subsidiary UB Finance accounted for 41 percent of group NPLs. At bank level the NPL ratio had grown to 8.4 percent of gross loans at the