Fitch affirms Pan Asia at ‘BBB-(lka)’; Outlook Stable | Daily News

Fitch affirms Pan Asia at ‘BBB-(lka)’; Outlook Stable

Fitch Ratings has affirmed Pan Asia Banking Corporation PLC’s (PABC) National Long-Term Rating at ‘BBB-(lka)’. The Outlook is Stable.

PABC’s National Long-Term Rating is driven by its intrinsic financial strength and reflects its high risk appetite stemming from its large exposure to retail and SME customers, who are more susceptible to deteriorating economic conditions, and the pressure on capital buffers due to the likely deterioration in asset quality.

The rating is highly influenced by the challenging operating environment for Sri Lankan banks, which is likely to constrain our assessment of PABC’s credit profile through its effect on financial and non-financial key rating factors. We expect GDP to contract by 3.7% in 2020 due to the impact from the coronavirus pandemic before recovering to grow by 4.7% in 2021, although growth prospects will depend in part on how the pandemic develops in Sri Lanka and globally.

“We expect asset quality metrics to worsen in the near to medium term as a result of the pandemic, which has exacerbated an already weak operating environment, even though relief measures in the form of moratoriums on loan repayments have temporarily delayed recognition of impaired loans. PABC’s impaired loan ratio, based on stage 3 loans, increased to 9.4% by end-2019 from 7.3% at end-2018, driven mostly by defaults in the SME segment.”