Bank Upgrade

July 6, 2012 (LBO) - Sri Lanka's state-run People's Bank has been upgraded to 'AA+(lka)' from 'AA(lka)' on strengthening links with the state, while the ratings of its subsidiaries have also been upped. Subsidiaries People's Leasing Company has been upgraded to 'AA-(lka)' from 'A+(lka) and People's Finance has been upgraded to 'A(lka)' from 'A-(lka)'.

People's Merchant Finance has been confirmed at 'BB+(lka)'. All ratings have a stable outlook.

The full statement is reproduced below

Fitch Upgrades People's Bank and Subsidiaries

Fitch Ratings-Colombo/Mumbai/Singapore-05 July 2012: Fitch Ratings has upgraded Sri Lanka's People's Bank (PB) and its subsidiaries People's Leasing Company PLC (PLC), and People's Finance PLC (PF), by a notch each. The Outlooks are Stable.

At the same time the agency has affirmed PB's associate company People's Merchant Finance PLC (PMF, 36% effective ownership by PB) at 'BB+(lka)' with Stable Outlook. A full list of rating actions is provided at the end of this commentary.

The upgrade of PB's rating reflects Fitch's reassessment of government support to PB in light of its growing importance as Sri Lanka's second-largest bank. This is under