Sunday Observer Online
   

Home

Sunday, 1 April 2012

Untitled-1

observer
 ONLINE


OTHER PUBLICATIONS


OTHER LINKS

Marriage Proposals
Classified
Government Gazette

Fitch affirms Merchant Credit of Sri Lanka at 'BBB(lka)'

Fitch Ratings Lanka has affirmed Merchant Credit of Sri Lanka Ltd's (MCSL) National Long-Term rating at 'BBB(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 MCSL's parent, the state-owned Bank of Ceylon (BoC; 'AA+(lka)'/Stable).

BoC has an effective shareholding of 86 percent in MCSL and is represented on the latter's board. The removal of the RWE, which was placed on May 27, 2011,follows Merchant Bank of Sri Lanka Plc's (MBSL) March 15, 2012 announcement that it would not proceed with its proposed merger with MCSL and another entity of the BoC group.

Fitch views MCSL's stand-alone financial profile to be weak. Its core business of vehicle finance, in the form of finance leases and hire purchase (HP), comprised 37 percent and 29 percent of its loan book at end-2011, with the balance comprising loans.

Due to slippages of some large facilities into non-performing loan (NPL) category, MCSL's gross NPL ratio (three-month NPLs/gross loans) increased to 19.1 percent at end-2011 (financial year ending Dec) from 16.8 percent at the end- of 2010.

The agency notes that MCSL has made an effort to reduce average loan size and thereby concentrations in loans.

Profitability in terms of pre-tax return on assets (adjusted for income of equity investments) decreased slightly to 3.1 percent in 2011 from 3.4 percent in 2010, due to an increase in operating expenses.

Fitch expects MCSL's profitability to come under pressure as its net interest margins (NIMs: 9.4 percent in end-2011, 9.5 percent in end-2010) tighten alongside an increase in its funding costs.

Capitalisation in terms of equity/ assets also remained low at 9.9 percent at end-2011.

The agency expects the company's capitalisation to be strengthened when it becomes listed on the Colombo Stock Exchange - a regulatory requirement for all registered finance companies (RFCs).

Funding is predominantly through deposits. Although a strong loan expansion of 37 percent in 2011 resulted in an increase in borrowings, MCSL's deposit concentrations remain high with its top five deposits accounting for 26 percentof total deposits at FYE11.

Also, unutilised credit lines were not sufficient to cover 36 percent of risk-sensitive assets and liabilities under 12 months maturity at end-December 2011.

Fitch expects that liquidity support would be forthcoming from BoC if deemed necessary.

 

EMAIL |   PRINTABLE VIEW | FEEDBACK

Sri Lankan Wedding Magazine online
LANKAPUVATH - National News Agency of Sri Lanka
Telecommunications Regulatory Commission of Sri Lanka (TRCSL)
www.army.lk
www.news.lk
www.defence.lk
Donate Now | defence.lk
www.apiwenuwenapi.co.uk
 

| News | Editorial | Finance | Features | Political | Security | Sports | Spectrum | Montage | Impact | World | Obituaries | Junior | Magazine |

 
 

Produced by Lake House Copyright © 2012 The Associated Newspapers of Ceylon Ltd.

Comments and suggestions to : Web Editor