Cargills Bank secures multi-notch upgrade from Fitch to A-(lka) with Stable Outlook

An expanding retail footprint and strong backing from its parent company helped Cargills Bank to secure a multiple-notch upgrade to its National Long Term Rating by Fitch Ratings from ‘BB(lka)’ up to ‘A-(lka)’ with a Stable Outlook.  

Elaborating on its assessment of CBL, Fitch focused operational integration achieved by the Bank through the use of Cargills Food City outlets to expand the bank’s operations, shared brand name and a capital infusion of Rs. 5.8 billion by CT Holdings PLC group in 2016.

“The multiple-notch upgrade of CBL’s rating follows Fitch’s assessment of support from its ultimate parent, CT Holdings PLC (CTH), and our expectation that the bank is likely to receive extraordinary support from its ultimate parent, if needed,” Fitch stated. 

The assessment also noted that support from the parent could be limited by the imposition of restrictions on voting rights of the parent by the regulator.

“For Cargills Bank to have secured an A-(lka) stable rating from Fitch just four years into our journey is, I believe, a testament to the unique value and model that we are bringing to the Sri Lankan banking industry. Backed by the support of our parent, Cargills Bank is working to redefine how Sri Lanka banks. We have achieved immense progress in expanding our ability to serve customers across the country, and while we anticipate a challenging year ahead, we plan to move ahead with consolidation of operations while increasing customer engagement and raising awareness about our unique products and services,” Cargills Bank MD/CEO Rajendra Theagarajah stated. 

Powering into its fourth year of fully-fledged operations, Cargills Bank reported a11% YoY growth in Profit After Tax (PAT) up to Rs. 122.8 million in FY2018, on the back of well-rounded growth across SME and Retail portfolios. 

Supported by an expanding scope of physical, and digital banking operations island-wide, and in synergy with the Cargills Group, the bank was able to generate Rs. 2.03 billion in Net Interest Income and Rs. 158.1 million in Net Fee and Commission Income, reflecting growth rates of 37% YoY and 39% YoY respectively.

Among key challenges the bank faced over the past year was a high NPA ratio, particularly in relation to few large ticket loans, delays in the commencement of credit card and acquisition business, the imposition of a Debt Repayment Levy and more stringent impairment provisioning with the implementation of SLFRS 9, all in the backdrop of tight monetary conditions of subdued economic growth over the last year.