State Upgrade

Nov 08, 2011 (LBO) – Sri Lanka’s state-run Peoples’ Bank has been upgraded by one level to ‘AA(lka)’ from ‘AA-(lka), with a stable outlook on state support and an upgrade of the sovereign in July 2011. “The rating reflect Fitch’s expectation of government support, underpinned by the bank’s increasing importance to the state post-war, systemic importance to the wider banking sector, and its state ownership,” the rating agency said in a statement.

“However, Fitch views the probability of support to be moderate.”

The bank’s exposures to the state (state and state-owned entities) accounted for 20 percent by the first half of 2011 down from 23 percent in 2010. The bank’s return on assets rose and non performing loan ratio improved, Fitch said.

The full statement is reproduced below

Fitch Ratings-Colombo/Singapore-08 November 2011: Fitch Ratings Lanka has upgraded People’s Bank’s (PB) National Long-Term rating to ‘AA(lka)’ from ‘AA-(lka)’. The Outlook is Stable.

The upgrade reflects Fitch’s view of the Government of Sri Lanka’s (GOSL) increased capacity to support PB, if required, as indicated by the upgrade of Sri Lanka’s Issuer Default Rating to ‘BB-‘ in July 2011 (for more