Fitch Ratings has raised People’s Bank’s National Long-Term Rating by two notches, from ‘AA-(lka)’ to ‘AA+(lka)’, with a Stable Outlook, the bank announced on Sunday.
The bank said it is only the second time it has received a double-notch upgrade, after the first in 2010. It said the new rating places it jointly at the top among domestic commercial banks and ahead of the large private sector banks on Fitch’s national scale.
In announcing the rating action, Fitch pointed to the stronger domestic franchises of People’s Bank compared with those of large private sector banks, according to the bank. It cited the bank’s customer reach, branch network, deposit base and established market position, which the bank said give it an advantage in funding strength and stability.
The bank said the upgrade follows Fitch’s recalibration of Sri Lanka’s national rating scale after the recent improvement in the country’s sovereign credit rating. It said the revised framework allowed Fitch to recognise the bank’s relative creditworthiness within the domestic banking sector.
Chairman Chandana Guniyangoda said the upgrade is “a strong recognition of the confidence and trust the institution has earned over six and a half decades”. Chief Executive Officer and General Manager Clive Fonseka said the bank has been transforming its business to become more competitive, efficient and customer-focused.
The bank said it is pursuing a strategic shift towards commercial competitiveness, operational efficiency, customer service and digital innovation. It thanked its board, staff, regulators and the Ministry of Finance for their support.
Background
A national rating scale ranks borrowers against others within the same country. The letters “lka” in the rating show that it is a Sri Lankan national rating, so it cannot be compared directly with international ratings or with national ratings given in other countries.
When a country’s sovereign rating changes, rating agencies can recalibrate the national scale. Banks and companies are then placed on the revised scale relative to one another, which is why a bank’s national rating can move even when its own position changes little.
People’s Bank is one of the largest state-owned commercial banks in Sri Lanka and has been operating for more than six decades. Its customers include depositors, small businesses and government institutions across the island.
Fitch rates the bank’s long-term creditworthiness on the national scale. Its ratings are the agency’s own opinion of creditworthiness.
What it means
A higher national rating can help a bank when it raises funds from investors and other lenders, because it signals stronger relative creditworthiness. Banks with higher ratings can often borrow on better terms, though the effect depends on market conditions and each lender’s own assessment.
For ordinary account holders, a rating is an assessment of a bank’s financial strength and not a guarantee of deposits or a change in interest rates or fees. Customers who want to know how the upgrade affects specific products should check with the bank directly or consult Fitch’s published rating information.
