Fitch affirms Citibank N.A. Colombo Branch at ‘AAA’

Thursday, 18 September 2014 00:00 -     - {{hitsCtrl.values.hits}}

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 the highest on the National Rating scale and reflects the credit profile and financial strength of Citibank, N.A. (A/Stable). Citibank, N.A.’s rating is higher than Sri Lanka’s Long-Term Local and Foreign Currency IDRs of ‘BB-’/Stable, and as a result CitiSL’s rating on the National Rating scale is mapped to ‘AAA(lka)’. The rating is linked with Citibank, N.A.’s IDR because of CitiSL’s legal status as a branch of Citibank, N.A. making it a part of the same legal entity. Fitch believes that support from Citibank, N.A. and its ultimate parent Citigroup would be forthcoming if required, subject to any regulatory constraints on remitting money into Sri Lanka. CitiSL’s strategic objectives are aligned with that of Citigroup and it is subject to periodic internal audits on a regional level. It uses the group’s core banking and anti-money laundering systems and benefits from services from the group’s shared centres located globally. Loans only contributed 25% to its total assets at end-1H14, which is smaller than at other Fitch-rated foreign banks reflecting CitiSL’s narrow focus on corporate clients for short-term funding, deposits and other account services. In contrast to other foreign branches operating in Sri Lanka, CitiSL has withdrawn from retail activities. CitiSL has consistently maintained sound asset quality with no non-performing loans since 2009. It funds its operations largely through corporate deposits and equity. The bank can draw on a USD30m credit line (13% of end-1H14 assets) from Citibank Singapore Limited, if needed. CitiSL remained well capitalised where Fitch Core Capital to risk weighted assets increased to 41.9% at end-1H14 (end-2013: 33%). CitiSL repatriated LKR1.2bn in 2013. Established in 1979, CitiSL operates as a single branch and accounted for 0.49% of the banking sector’s assets at end-2013. It is the smallest of the Fitch-rated foreign bank branches operating in Sri Lanka. Rating sensitivities Any changes to Fitch’s expectation of support could have a negative effect on the rating. In addition, a downgrade of CitiSL’s rating could result from Citibank, N.A.’s rating falling below Sri Lanka’s IDR, but the prospect of this is rather remote as it would require an eight-notch downgrade.