Better Outlook

Oct 11, 2010 (LBO) - The outlook on Sri Lanka's stat-run Bank of Ceylon, the island's largest commercial bank by assets, has been lifted to 'positive' from 'stable' after a lifting of the sovereign rating increased the capacity of the state to support it, Fitch Ratings said.

But Fitch said it considered the absolute capitalisation (equity/assets) of the Bank of Ceylon to be relatively low at 4.6 percent by the first half of 2010 compared with 9.

4 percent for other 'AA(lka) rated commercial banks, in view of the banks scale and systemic importance.

In April 2010, the bank had converted its London branch to a fully owned subsidiary BoC UK Ltd.

Bank of Ceylon accounts for 17.9 percent of Sri Lanka's commercial bankig assets.

In the first half of 2010 financial year the bank's loan book had grown 23.

6 percent with private sector credit demand and lower interest rates, following a 1.6 percent contraction of its loan in 2009 and a 4.



0 percent contraction in 2008.

The exposure to the state and state enterprises had fallen to 34 percent of loans at end 2009 from 49 percent at end 2006.

Corporate clients were given 27 percent of loans and retail clients 39 percent.

Gross non-performing loans (NPLs) had increased to 5.

8 percent at end 2009 from 5.2