Citizens Development Business at ‘BBB(lka)’

Fitch Ratings has affirmed Citizens Development Business Finance PLC’s (CDB) National Long-Term Rating at ‘BBB(lka)’ with a stable outlook. Fitch has also affirmed CDB’s subordinated debt rating at ‘BB+(lka)’.

CDB’s National Long-Term Rating reflects its established market presence, with 6%-7% market share in sector assets and deposits, and majority exposure to lower-risk motor cars, which underpin its asset-quality performance. These advantages are offset by its moderate profitability, higher leverage and lower loss- absorption buffers compared with other Fitch-rated large finance and leasing companies The operating environment for Sri Lankan FLCs continues to stabilise, with improving GDP growth (1H24: 5.0% yoy; 2023: -2.3%), normalising inflation and reduced market interest rates. This should support the sector’s credit growth, asset quality and profitability.

CDB is one of Sri Lanka’s largest FLCs with key exposure to vehicle financing and gold-backed lending, which accounted for 75% and 18% of gross loans, respectively, at the end of the financial year to March 2024 (FY24), from 73% and 19% at end-FY23.

Within vehicle financing, motor cars constituted the majority (55%) of gross loans, while three-wheelers accounted for 17% at end-FY24 (end-FY23: 47% and 21%). “We expect three-wheeler exposure to decline further while gold and four-wheeler loans continue to grow. This should be mildly positive for blended asset quality, if managed well.”

Source:Daily News