Fitch upgrades HNB's national ratings

RATING: Fitch Ratings Lanka has upgraded Hatton National Bank's ("HNB") National Issuer Long-term rating to 'A+(lka)' from 'A(lka)'.

At the same time, the agency upgraded the National rating of HNB's subordinated debentures to 'A(lka)' from 'A-(lka)' (A minus(lka)). The Outlook on the ratings is Positive.

The upgrade to 'A+(lka)' reflects HNB's strong credit risk relative to other issuers or issues in the country as well as the bank's improving profitability, its better capital formation going forward and its improving asset quality.

Fitch, however, notes that the changes in circumstances or economic conditions may affect the capacity for timely repayment of financial commitments to a greater degree than for financial commitments denoted by a higher rated category.

Although HNB's profitability still lags behind its major peers, the agency notes that its profitability has improved significantly with its ROA at 1.07% in 2005, doubling its comparative figure in 2004.

This was largely due to HNB's improving margins on its lending portfolio as well as the bank's improved cost management.