Ratings agency warns Sri Lankan bank over exposure to Maldives lending

Financial risk evaluation agency Fitch Ratings has warned one of Sri Lanka’s largest privately-held banks that its AA rating is vulnerable due to exposure to weak lending in the Maldives.

According to the Lanka Business Online publication, Fitch warned that Hatton National Bank (HNB)’s rating was “constrained by the bank’s exposure to weak credits in Maldives, lower loan loss reserve coverage and a rising loan/deposit ratio.”

HNB’s exposure to Maldivian resort projects (23% of equity at end-2011) “mean downside risks from asset quality remain,” Lanka business reported.

Fitch is one of the world’s largest three credit ratings agencies, along with Standard & Poor (S&P) and Moody’s.

Ratings produced by these firms are used by investors, issuers, investment banks, broker-dealers, and governments to evaluate financial risk.