Fitch upgrades People's Bank

Construction work in progress on a flyover near the Hunupitiya Railway Station to facilitate the Colombo-Katunayake expressway which is due for completion in the first quarter of 2013 at a cost of 292 million US Dollars. Picture by Sumanachandra Ariyawansa

Fitch Ratings Lanka has upgraded People's Bank's (PB) National Long-Term rating to 'AA(lka)' from 'AA-(lka)'. The outlook is stable.

The upgrade reflects Fitch's view of the Government's of increased capacity to support PB, if required, as indicated by the upgrade of Sri Lanka's Issuer Default Rating to 'BB-' in July 2011. The rating reflect Fitch's expectation of government support, underpinned by the bank's increasing importance to the state post-war, systemic importance to the wider banking sector, and its state ownership. However, Fitch views the probability of support to be moderate.

As PB's ratings are driven by expectations of state support, a change to Sri Lanka's sovereign rating may change PB's ratings.

An upgrade may also result from a demonstration of preferential support to the bank relative to other state banks or PB's increased alignment with the government's policy framework such that it operates as an effective organ of the government and is an integral part of the apparatus of the state.