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| Tuesday, 3 February 2004 |
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State Mortgage and Investment Bank assigned SL A+ rating Fitch Ratings Lanka Ltd (FRL) assigned SL A+ (A plus) national rating for Implied Long-term unsecured Senior Debt of State Mortgage and Investment Bank (SMIB). SL A+ long-term rating denotes a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. SMIB's rating reflects its state ownership, relatively low inherent risk in the housing mortgage business, strong capital base and the healthy profitability. The rating also reflects the future challenges facing SMIB's business model and the relatively high interest rate and liquidity risk of SMIB due to the concentrated nature of its funding base. Further SMIB's NPL's are relatively high, partly due to the customer portfolio of the bank, with high exposure to the self-employed segment. SMIB estimates that around 30% of its borrowers are engaged in primary industries such as farming which are subject to seasonal income flows occurring twice a year. As such a significant proportion of the NPLs may be considered performing, if repayments are aggregated on an annual basis, even though the monthly instalments are not paid on schedule. Nevertheless the actual losses on NPL's have historically been somewhat low. SMIB is one of the oldest banks in Sri Lanka, tracing its origins to 1931. It was constituted in its present form in 1975 under the SMIB Law No. 13 of 1975 as a fully state owned bank, by amalgamating the Ceylon State Mortgage Bank(established in 1931) and the Agricultural and Industrial Credit Corporation (established in 1943) and commenced operations on January 1, 1979. SMIB is a licenced specialised bank which is regulated by the Central Bank of Sri Lanka. Fitch Ratings Lanka Ltd is a joint venture between Fitch Ratings, USA, International Finance Corporation Washington, Central Bank of Sri Lanka and several other leading local financial institutions. Fitch Ratings, USA is one of the three global full service credit rating agencies and rates over 2,900 international bank and financial institutions. Fitch Ratings USA has over 90 years' experience in credit analysis and a combined analytical and professional staff of more than 1,400 many of whom possess over 10 years of specialised industry experience. |
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