Fitch Ratings Lanka upgraded Singer Finance (Lanka) Limited's (SFL) National Long-term rating to 'BBB(lka)' from 'BBB-(lka)', reflecting the increased level of support available from its parent Singer Sri Lanka and in the agency’s view, its increased strategic importance to the parent company.
Fitch said the two companies share the ‘Singer’ brand and that from early 2009, along with the traditional lending business SFL started providing consumer financing for Singer’s locally-assembled products. The statement added that Singer infused Rs.200 million of equity into SFL in October 2009 and channeled Rs.833 million of borrowings to SFL at end-December 2009 to support SFL's portfolio growth. SFL contributed to a 38.3% of group pre-tax profit in the 12 months to end-December 2009, up from 15% for the year ended December 2008.
Fitch noted that SFL's loan portfolio grew 48% in the nine months to end-December 2009 following the transfer of the financing of Singer’s locally-assembled products. Singer manages the consumer durable portfolio for a fee. The agency added that the shorter tenure and small-ticket nature of these loans, combined with the stringent credit evaluation followed by Singer has enabled the company to maintain a low (three-month) gross non performing loan (NPL) ratio of 2.6% at December 2009 on this segment.
Although the proportion of gross NPL’s on SFL's vehicle financing portfolio was higher at 6.9% at December 2009, this compares well with its peers who averaged 10.8% at end-September 09.