Fitch affirms People’s Merchant Bank PLC at ‘BBB-(lka)’

Fitch Ratings Lanka has re-affirmed Lanka’s People’s Merchant Bank Plc’s (PMB) National Long Term rating at ‘BBB-(lka)’.

The outlook is stable.

“PMB’s rating factors in its modest profitability, small asset and equity base and asset quality which was on par with the sector” Fitch said. It also considered the potential support from its main shareholder People’s Bank (‘A-(lka)’/Positive)

PMB is a listed merchant bank primarily involved in vehicle financing through leases and hire purchase agreements to the small and medium enterprise sector, trade finance, corporate finance, short term investment and real estate.

PMB has maintained an overall loan growth of 31% in first half of FY 08/09, which was higher than the sector. PMB’s asset quality is satisfactory. Due to the current environment, gross NPLs (defined by Fitch as loans in arrears for over three months)/gross loans rose to 12.7% at 30 Sep 2008 from 9.6% at FYE06.

Net NPL/Equity ratio deteriorated to 46.6% at 30 Sep 2009 from 34.8% at FYE06 largely due to the increase in leases in arrears between three and six months.

However Net NPL/Equity ratio at the six month level was 5.8% at 30 Sep 08 (FYE 08 8.6%)