Fitch affirms Commercial Bank at AA+

Fitch Ratings Lanka has affirmed the National Long-term rating of Commercial Bank of Ceylon Ltd (CB) at 'AA+(lka)', reflecting the bank's sustained profile amongst local commercial banks in terms of its strong franchise, good profitability, sound asset quality, strong solvency and high capitalisation.

In addition, Fitch has affirmed CB's individual rating at 'D' and support rating at '5'. Fitch has also affirmed the 'AA(lka)' rating of the bank's subordinated debentures and the 'AA-(lka)' (AA minus(lka)) rating assigned to CB's preference shares. The outlook remains stable.

Though CB has traditionally been a dominant player in the corporate banking market, it is gradually developing its presence in the consumer banking market.

Consequently, the bank's portfolio at FYE07 was distributed equally among both these segments.

However, Fitch believes the management's intended focus on middle market corporates could result in the composition shifting in favour of the corporate segment over the medium term.

Loan growth dropped to 16% by FYE07 (compared to 27% in FY06 and a CAGR of 31% from FY02 to FY06), in response to high market interest rates and regulatory measures aimed at curbing credit growth across the industry.