Fitch downgrades Sri Lanka financial institutions on sovereign downgrade

Dec 05, 2018 (LBO) – Fitch Ratings has downgraded the Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of the following Sri Lanka-based financial institutions following the downgrade of Sri Lanka's sovereign rating: - National Savings Bank (NSB) to 'B' from 'B +'; Outlook Stable - Bank of Ceylon (BOC) to 'B' from 'B +'; Outlook Stable - DFCC Bank PLC ( DFCC) to 'B' from 'B +'; Outlook Stable - People's Leasing & Finance PLC's (PLC) to 'B-' from 'B'; Outlook Stable The Stable Outlook on NSB, BOC and PLC reflects the Stable Outlook on the sovereign. Fitch has also downgraded the Viability Ratings (VR) of BOC and DFCC to 'b' from 'b+' to reflect the more challenging operating environment in Sri Lanka. Fitch has revised their assessment of the operating environment in Sri Lanka to 'b/stable' from 'b+/negative' to reflect the likely adverse impact on the banks' credit profiles following the deterioration in the Sri Lankan sovereign's credit profile amid difficult domestic and external conditions. The National Ratings of BOC, NSB, DFCC and PLC were not covered in this review. KEY RATING DRIVERS - IDRS, VIABILITY RATINGS AND SENIOR DEBT RATINGS The IDRs of NSB and BOC reflect Fitch's expectation of extraordinary support from the sovereign. The downgrades of their IDRs reflect Fitch's view that the state's ability to provide support to these banks has reduced, although the state's propensity to do so has not changed.