Fitch rates NSB ‘Bb-’/stable

Fitch Ratings has assigned Sri Lanka’s National Savings Bank (NSB) Long-Term Foreignand Local-Currency Issuer Default Ratings (IDRs) of ‘BB-’ with Stable Outlooks.

NSB has also been assigned a Support rating (SR) and Support Rating Floor (SRF) of ‘3’ and ‘BB-’ respectively, the latter being the same level as the sovereign. The agency has not assigned NSB a Viability Rating as it is viewed as a public-mission bank due to its policy role.

Simultaneously, NSB’s National Long-Term rating has been affirmed at ‘AAA(lka)’ with a Stable Outlook. A full list of rating actions is provided at the end of this commentary.

NSB’s ratings reflect Fitch’s expectation of the government of Sri Lanka’s high propensity but moderate ability to provide support to the bank in case of need.

The state’s high propensity to support NSB stems from the bank’s full state ownership, systemic importance and its policy mandate of mobilising retail savings and investing them in government securities. The state’s moderate ability to provide timely support to NSB at times of distress is reflected in the ‘BB-’/ Stable sovereign rating.

The ratings also take into consideration preferential state support to NSB in the form of the explicit guarantee on deposits contained in the NSB Act. Fitch is of the view that state support, in case of need, is likely to be for depositors and senior unsecured creditors of NSB to maintain confidence and systemic stability.

NSB ranked as the thirdlargest bank in the system in deposits and the fourth-largest in assets at end -2012.