Fitch affirms ComBank at 'AA+(lka)'

Fitch Ratings Lanka has affirmed the National Long-term rating of Commercial Bank of Ceylon PLC (CB) at 'AA+(lka)', reflecting the bank's sustained strong financial profile amongst local commercial banks.

In addition, Fitch has affirmed CB's Individual rating at 'D' and Support rating at '5', as well as the 'AA(lka)' rating of the bank's subordinated debentures. The outlook remains stable. Fitch observes that in spite of the impact of payments on oil derivatives, cushioned to some extent by the profit on the disposal of former associate - Commercial Leasing Company PLC ('A-(lka)'/Stable), CB's core profitability remained intact with ROA (adjusted for the aforementioned items) remaining at 1.7 per cent in FY08, and above the 1.1 percent for the sector.

The profitability of the Bangladesh operation is higher (ROA of 2.5 percent in FY08), benefiting from lower effective taxes (47 percent vis-a-vis 57 per- cent), provision charges and operating costs; although this represented only 8 percent of CB's total assets and 13 percent of net income at FYE08.

The agency believes that CB's FY09 core profitability could come under pressure on account of slower expected revenue growth and higher credit costs.