HSBC Sri Lanka’s asset base, though strong by Sri Lankan standards, weakened in the last year’s financial year due to increased ‘delinquencies’ on credit card advances, residential housing loans, and loans to medium-sized corporates, Fitch Rating said this week.

“In the face of an unfavourable macroeconomic environment, the bank has since tightened its credit underwriting standards in consumer banking (and credit cards in particular) and increased its focus on collections and recoveries during the latter part of FY07,” the rating agency said in a statement affirming the bank’s National Long-term rating at 'AAA(lka)' on a stable outlook.

It said HSBC’s loan growth slowed considerably in FY07 with a growth rate of just 6.0% year on year, which was well below the 16.5% growth witnessed by the domestic private Licensed Commercial Bank (LCB) sector. Growth picked up in Q1’08 however, with the bank's loan portfolio growing by 10.7% in Q1 alone.

The loan portfolio is fairly well diversified and covers both corporate (large multinationals and medium scale corporates and an increasing SME exposure) and retail (credit cards, housing, personal installment loans) segments.