Fitch affirms 5 small and mid-sized Sri Lankan banks

Fitch Ratings Lanka has affirmed National Long Term Ratings on five small and mid-sized Sri Lankan bank - Nations Trust Bank (NTB), -- Pan Asia (PABC), Union Bank (UB), SANASA Development Bank (SDB) and Amana Bank (Amana)

A media statement from Fitch said the affirmations follow Fitch's periodic review of small and mid-sized Sri Lanka banks and are driven by the banks' intrinsic profiles. Fitch expects the banks' capitalisation to remain thin in the medium term, as they are likely to sustain a strong increase in loans. PABC, SDB and Amana infused capital to meet their respective minimum regulatory core capital levels. The impact of the implementation of SLFRS 9 in 2018 could also significantly reduce the banks' capital positions.

The banks' absolute non-performing loans (NPLs) increased in 1H17, in line with our expectations. Fitch believes asset-quality risks are greater for these banks due to their greater exposure to retail and SME customer segments, which we see as more susceptible to economic downturns.