Acquisitions of small banks ‘neutral’ to BOC's and PB's ratings - Fitch

FITCH Ratings yesterday said the proposed transfers of State-owned shares of Housing Development Finance Corporation Bank of Sri Lanka (HDFC, BB+(lka)/Rating Watch Positive) to Bank of Ceylon (BOC, CCC+/AA-(Ika)/ Stable) and of State Mortgage and Investment Bank (SMIB, BB(lka)/Rating Watch Positive) to People’s Bank (Sri Lanka) (PB, AA-(1ka)/Stable) are unlikely to affect the acquirers’ ratings.

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“The limited scale of the targets relative to the large state banks, and expectations around capital support, underpin our view,” Fitch said in a statement.

The Government announced Cabinet approval on 11 November to transfer all direct and indirect State holdings in HDFC to BOC and SMIB to PB, respectively. The purchase consideration, structure and timeline have not been disclosed.

Fitch said it will assess final terms when they are available, including any consolidation method and timing.

“We do not expect material changes to BOC’s and PB’s consolidated credit profiles from these transfers. HDFC and SMIB are small relative to their acquirers and the sector, accounting for 1%-1.5% of the acquirers’ banklevel assets,” the ratings agency said.