Fitch upgrades Sri Lanka’s HBL to AA-(lka)

Fitch Ratings has raised the National Long-Term Rating of Habib Bank Limited – Sri Lanka Branch (HBLSL) to AA-(lka) from A(lka), with a stable outlook.

This upgrade reflects the improved creditworthiness of its parent company, Habib Bank Limited (HBL), Pakistan’s largest bank, following the upgrade of Pakistan’s sovereign rating.

The enhanced credit profile of HBL increases its capacity to provide exceptional support to its Sri Lankan branch, underpinning the rating upgrade.

Fitch raised Pakistan’s Long-Term Foreign-Currency Issuer Default Rating last month to CCC+ from CCC. The credit profile of the head office continues to be limited by its close ties to the state, reflecting its high level of interconnectedness.

HBLSL benefits from being a branch of HBL, sharing the same legal entity. However, any potential support is subject to regulatory constraints on funds transfer from Pakistan to Sri Lanka.

Despite HBLSL’s strong operational integration with HBL, its relatively small size, accounting for only 0.3 per cent of HBL’s total assets at the end of the first quarter of 2024, is also a factor in the rating assessment.

Attribution: Fitch Ratings report

Subediting: M. S. Salama