Fitch affirms Ceylease Financial Services at ‘BB+(lka)'; Off RWE
Fitch Ratings Lanka has affirmed Ceylease Financial Services Ltd's (CFSL)
National Long-Term rating at ‘BB+(lka)'. The rating has been removed
from Rating Watch Evolving (RWE) and assigned a stable outlook.
The rating has been uplifted based on Fitch's expectations of support
from CFSL's parent, the state-owned Bank of Ceylon (BOC; ‘AA+(lka)'/Stable).
BOC has a 55% shareholding in CFSL, and is represented on the latter's
board. Further, BOC continues to be a key creditor to CFSL, accounting
for 28% of its total borrowings at end-2011. The removal of the RWE,
which was placed on 26 July 2011, follows Merchant Bank of Sri Lanka
Plc's (MBSL, 72% owned by BOC) 15 March 2012 announcement that it would
not proceed with its proposed merger with CFSL and other entities of the
BOC group.
Fitch notes CFSL's weak stand-alone financial profile. The company
mainly provides vehicle finance, in the form of leases (37.1%), hire
purchase (49.6% ) and loans (13.3%) at end-2011. During 2011, the
company wrote off Rs.104 million of non-performing loans (NPLs) that
were fully provided. Consequently, its NPL ratio declined sharply to
15.4% over three months in arrears and 6.9% over six months in arrears
at end-2011 from 25.1% and 13%, respectively, in end-2010.
Profitability as measured by pre-tax return on assets (ROA) increased
to 3.9% in 2011 (2010: 1.6%). |