Hatton National Bank (HNB) has received an international credit rating from Moody’s Investors Service, the first local bank to do so, the bank said this week. Rajendra Theagarajah, HNB Managing Director / CEO said, “we are delighted to announce that HNB has been assigned an international rating by Moody’s which is on par with the sovereign rating of B1 of Sri Lanka. This is the first ever international rating obtained by a Sri Lankan bank.”
According to a Moody’s statement, HNB was assigned a B1 rating.“This is the first assignment of international ratings for HNB. These ratings and outlooks take into account the balance of strengths and weaknesses characterizing HNB’s credit profile on a standalone basis, as well as our assumptions on the probability of government support in times of stress, which we assess as moderate. At E+ / b1, our support assumption does not result in any rating uplift,” Moody’s said.
HNB’s business model is geared towards lending to corporates and small and medium-sized enterprises, though it has a diversified portfolio of retail clients and products. Its credit profile is characterized by a significant domestic franchise, with a market share of approximately 10% and an extensive network of branches and ATMS distributed throughout the country.
From this platform, HNB has steadily generated strong profitability while building and maintaining above-average capitalization levels relative to other similarly-rated banks rated in the Asia-Pacific region. At the same time, the bank is inherently vulnerable to the cyclicality typically associated with emerging markets, which exposes it to periodic asset quality pressure, as evidenced by its non-performing loan record. “Also, for a bank exposed to such risk, we consider its provision coverage to be low,” Moody’s said.
It said for HNB to be upgraded, it needs a combination of two factors: a demonstrated resilience of its core financial ratios over time; and an upgrade of the government rating against which it would otherwise be constrained. |
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