Fitch Ratings Lanka this week affirmed National Savings Bank's (NSB) National Long-term rating at 'AAA(lka)' and said the outlook is stable.
NSB's rating reflects its state ownership and systemic importance to the state in mobilising retail savings and investment of such savings in government securities (G'secs). NSB's G'secs holding accounted for approximately 39% of the banking systems expoure to G'Secs at FYE09 (46% at FYE08), indicating NSB's significance to the government. In addition, NSB's deposits have an explicit guarantee from the Government (95% of borrowings at H110), the Fitch statement said.
NSB is bound by the NSB Act No. 30 of 1971 to invest a minimum of 60% of its deposits in government issued and guaranteed securities. Total government exposure (tradable securities and direct loans to the state and state-owned entities) accounted for 70% of NSB's assets in H110 (FYE09: 74%, FYE08: 69%). The government securities are primarily held to maturity (FYE09: portfolio bond duration was approximately 2 years).
“Given the government securities it holds, NSB enjoys strong liquidity (H110 statutory liquidity ratio: 80%), but it will continue to face significant interest rate risks if short-term interest rates rise due to maturity mismatches inherent in its asset and deposit structure,” Fitch said.
Over the near-term, NSB expects the loan mix to shift further to pawning and housing loans.
The majority of non-performing loans (NPLs) were from the housing loan segment on account of industrial job losses experienced in late 2008 and early 2009.