S&P lowers view on four Sri Lanka banks

Standard & Poor’s said it revised the outlook on the long-term issuer credit ratings on National Development Bank plc, National Savings Bank, People’s Leasing & Finance plc and DFCC Bank to negative from stable.

The agency also said it affirmed the ratings on these Sri Lankan financial institutions and on their outstanding notes.

National Development Bank’s counterparty credit rating was affirmed at B+; DFCC Bank’s counterparty credit rating was affirmed at B and senior unsecured rating at B; People’s Leasing & Finance’s counterparty credit rating was affirmed at B+; and National Savings Bank’s counterparty credit rating was affirmed at B+ and senior unsecured rating at B+.

The ratings reflect the potential deterioration in the operating environment for these entities and the revision in the outlook on the sovereign long-term credit rating on Sri Lanka to negative from stable due to rising fiscal and external imbalances in the country, S&P said.

The operating conditions for Sri Lankan financial institutions also are expected to deteriorate, along with the sovereign’s weakening external and fiscal performance.

The weak operating environment could manifest in the form of rising credit risk in Sri Lanka, particularly if remittances into Sri Lanka remain weak or the country’s economic growth is lower than our current base-case expectations.

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