Fitch assigns ‘A’ rating to HNB Grameen Finance

Friday, 2 October 2015 00:07 - - {{hitsCtrl.values.hits}}

Fitch Ratings has today assigned HNB Grameen Finance Ltd. (HGL) a National Long-Term Rating of ‘A(lka)’ with a Stable Outlook.

Key rating drivers

HGL’s rating reflects Fitch’s expectation of support from its parent, Hatton National Bank PLC (HNB; AA-(lka)/Stable). This view is based on HNB’s majority shareholding (51%), its involvement in the strategic direction of HGL through board representation, and the common HNB brand.

The two-notch differential reflects HGL’s limited role in the group. HGL is mainly engaged in the provision of micro finance, which is not a significant product for HNB as it accounted for 2.7% of the bank’s loan book at end-June 2015. Furthermore, there is limited operational and management integration of the entities.

HNB acquired 51% of HGL in November 2014 as part of a financial-sector consolidation program. The bank rebranded the finance company and now has four seats on HGL’s board, including the chairmanship.

HGL obtained a licence to operate as a finance company in 2010. It accounted for just 1.2% of the licensed finance company sector’s assets at end-March 2015.

Rating sensitivities

HGL’s rating could change if HNB’s rating changes or if HGL’s strategic importance to the bank changes. Narrower notching could result from greater importance to the group through stronger synergies and closer operational integration alongside HNB’s majority shareholding.