Fitch affirms Citibank NA - Colombo branch at ‘AAA(lka)’ | Sunday Observer

Fitch affirms Citibank NA - Colombo branch at ‘AAA(lka)’

Fitch Ratings Lanka has affirmed Citibank NA - Colombo Branch’s (CitiSL) national long-term rating at ‘AAA(lka)’. The Outlook is Stable.

CitiSL’s rating reflects the credit profile and financial strength of its head office - Citibank, NA (A+/Stable/a). It also reflects Fitch’s expectation of continued support from the head-office as CitiSL is a branch of Citibank, N.A. and forms part of the same legal entity. The small size of the branch (less than 1% of the total assets of Citibank, NA) implies that support, if any, would not be material to the head office.

Citibank, NA’s Issuer Default Rating (IDR) is higher than Sri Lanka’s long-term local and foreign currency IDRs of ‘B’ with Stable Outlook and as a result, CitiSL’s National Long-Term Rating is mapped to ‘AAA(lka)’, which is the highest end on the National Rating scale.

Fitch believes that support from Citibank, N.A. would be forthcoming, subject to any regulatory constraints on remitting money into Sri Lanka.

The high probability of support is underpinned by CitiSL’s strong operational integration with Citigroup through the use of common systems and regular reporting. The branch’s strategic objectives are also aligned with those of the group.

CitiSL maintained its record of zero non-performing loans since 2009, reflecting its stringent credit evaluation framework.

The branch’s selective lending to top-tier local corporations, financial institutions and multinational corporates explains its highly concentrated loan book. We expect CitiSL to maintain above industry-average capitalisation to support its business plans. CitiSL’s Fitch Core Capital ratio declined to 34.9% by the end-3Q18 from 42.2% at the end-2017 owing mainly to a steep capital charge for foreign exchange volatility, but remained high compared with Fitch-rated peers.

CitiSL’s rating could be downgraded if Citibank, NA’s rating falls below Sri Lanka’s IDR (B/Stable), although Fitch sees that as highly unlikely in the near to medium term.