Moody’s affirms HNB on par with national rating
Moody’s Investor Services (Moody’s) recently affirmed Hatton National Bank’s (HNB) foreign currency issuer rating of B1 with a stable outlook. Commenting on the rating HNB PLC Managing Director/CEO Jonathan Alles stated, “We are happy to note the international rating affirmed by Moody’s is on par with the sovereign rating despite the challenging operating environment and the recent change effect- ed on the rating outlook on the sovereign.”
As per the press release by Moody’s, HNB has a baseline credit assessment (BCA) of b1 and a local currency deposit rating of B1, which is at the same level as the Government of Sri Lanka (B1 stable). The bank’s foreign currency deposit rating is one notch lower at B2. The b1 BCA reflects HNB’s strong capital position as well as its high net interest margin (NIM), which supports profitability and internal capital generation. At the same time, the BCA also captures the inherent vulnerability to market cyclicality, which is typically associated with emerging markets and which exposes the bank to periodic asset quality pressures.
Moody’s view the probability of systemic support in times of stress as moderate, as HNB is a private sector bank with a reasonable market share in terms of assets of 8.7 percent as at December 2012. Therefore, as per Moody’s, the issuer rating of B1 does not benefit from any uplift from the b1 BCA.
The stable outlook on the bank’s ratings reflects Moody’s expectation that the bank will maintain sufficient capital and liquidity buffer to cope with stress conditions while it pursues business growth.