FITCH AFFIRMS CITIBANK N.A
Fitch Affirms Citibank N.A – Colombo Branch at ‘AAA(lka)’; Outlook Stable
Fitch Ratings-Colombo-25 May 2018: Fitch Ratings Lanka has affirmed Citibank N.A. – Colombo Branch’s (CitiSL) National Long-Term Rating at ‘AAA(lka)’. The Outlook is Stable.
KEY RATING DRIVERS
CitiSL’s rating is at the highest end on the National Rating scale and reflects the credit profile and financial strength of its head office – Citibank, N.A. (A+/Stable/ a). It also reflects Fitch’s expectation of continued strong support from the head office as CitiSL is a branch of Citibank,
N.A. and forms part of the same legal entity. The relatively small size of the branch (less than 1% of the total assets of Citibank, N.A.) implies that support, if any, would not be material to the head office.
Citibank, N.A.’s Issuer Default Rating (IDR) is higher than Sri Lanka’s Long-Term Local- and Foreign-Currency IDRs of ‘B+’/Stable and as a result CitiSL’s rating on the National Rating scale is mapped to ‘AAA(lka)’.
Fitch believes that support from Citibank, N.A. would be forthcoming if required, 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 has maintained a record of zero non-performing loans since 2009, underscored by its stringent credit evaluation framework. The branch’s selective lending to top-tier local corporations, financial institutions and multinational corporates led to a highly concentrated loan book at end-March 2018.
CitiSL maintains above industry-average capitalisation to support its business plans despite regular profit repatriations. CitiSL’s Fitch Core Capital ratio has remained in excess of 40% over the last several years (42.0% at end-2017).
The branch’s loans/deposit ratio has been increasing but remained moderate at 78.3% at end- 2017. CitiSL has access to intergroup funding, if needed.
A downgrade of CitiSL’s rating could result from Citibank, N.A.’s rating falling below Sri Lanka’s IDR, although Fitch sees that as highly unlikely in the near-to-medium term. Significant changes to Fitch’s expectation of support from Citibank N.A. could also have a negative impact on the rating. There is limited scope for upward rating action on the National Long-Term Rating as it is already at the highest point on the scale.