Fitch Ratings has affirmed the national long term ratings on five small and mid-sized Sri Lankan banks. 

Nations Trust Bank PLC (NTB) has been affirmed at ‘A(lka)’, Pan Asia Banking Corporation PLC (PABC) at ‘BBB(lka)’, Sanasa Development Bank PLC (Sanasa) at ‘BB+(lka)’, Union Bank of Colombo PLC’s (UB) at ‘BB+(lka)’ and Amana Bank PLC (Amana) at ‘BB(lka)’.

The ratings are all based on the banks’ intrinsic strengths. The main development affecting their business profiles is the banks’ initiatives to expand their small franchises. The banks’ unique business models have led to growth in different areas.

While UB has shifted to larger corporates, the other banks are more focused on the small and medium enterprise (SME) and retail segments. All of their loans grew faster than that of the overall banking sector, resulting in continued decline in their capital ratios. 

The capitalisations of NTB, UB and Sanasa have remained satisfactory but Amana and PABC have yet to maintain capital of at least Rs.10 billion, which would be required by January 1, 2018. 

The NPL ratios of the banks have been decreasing. This has been largely a function of the strong growth in loans, which could lead to asset-quality pressure as the loan book seasons. 

The banks’ deposit franchises are weak in relation to more established banks and all except Amana have a small share of current and savings accounts (CASA) in the deposit mix.