Derived Rating

Jan 03, 2011 (LBO) - RAM Ratings Lanka has confirmed State Mortgage and Investment Bank’s (SMIB) long- and short-term financial institutions ratings of A and P1 with a stable outlook for the former, a statement said. "The ratings are based on the bank’s strong capitalisation and the financial flexibility it derives from its sole shareholder, the government of Sri Lanka," the rating agency said.

"However, the ratings are moderated by SMIB’s higher than industry level of non-performing loans (NPLs) and the substantial negative gap in its short-term asset-liability maturity mismatch (ALMM)."

SMIB, a licensed specialised bank under the Ministry of Finance, can provide loans for housing and agricultural purposes but its main role is as an institution that fulfils the government's "social obligations," to promote home ownership for the masses, it said.

"Despite its conservative lending in the recent past, the bank’s NPLs have increased and remain significantly higher than its peers’," RAM Ratings Lanka said.

SMIB's gross NPL ratio of 37.02 percent as at end-December 2009 remained unchanged as at end-September 2010.

The high bad loan ratio resulted from a concentration of lending against th