Business

Sri Lanka begins its first ever assembly manufacturing compact sports utility vehicle (SUV) KUV100 in partnership with an Indian giant unleashing the potential of adding local value in the production process.

India’s Global Diversified Conglomerate Mahindra & Mahindra partnered with Sri Lanka Ideal Motors opened vehicle assembly manufacturing plant in Welipenna, Mathugam on Saturday.

Prime Minister Ranil Wickremasinghe and High Commissioner of India Taranjit Singh Sandhu cordially joined hands in launching assembly manufacturing process of (SUV) KUV100 at a glittering ceremony.

The new Rs3. billion vehicle plant will have an installed annual capacity of up to 5,000 units and will provide direct and indirect employment to about 200 people over the next two years.

The CKD (completely knocked down) unit plant, which has a clear operational strategy for the next three years, will produce several vehicles starting from M&M's compact sports utility vehicle (SUV) KUV100.

The first vehicle was rolled out today. The local assembly operations include localisation of four components such as tyres, batteries, exhausts and seating systems.

While tyres will be supplied by Ceat tyres, the automotive batteries will come from the battery maker Exide, both Indian companies with footprints in Sri Lanka.

Sri Lanka implements a free trade agreement with India but the country is not exporting automotive components to India, so here is a chance to actually accomplish that," Nalin Welgama, Chairman of Ideal Motors, said

Adhering to government policy for electric vehicles in Sri Lanka, Mahendra has already planned two EVs for local market, Dr. Pavan Goenka, Managing Director, Mahindra & Mahindra Ltd said
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The Sri Lanka passenger car market's size is in the range of 32,000-35,000 units per annum, of which new car sales account for only 25%.

Prime Minister Ranil Wickremesinghe in his address mentioned the substantial opportunities that exist for industrial collaboration between Indian and Sri Lankan companies given the complementarities.

Indian High Commissioner Taranjit Singh Sandhu said that the plant symbolises the promotion of ‘Make in Sri Lanka’ alongside ‘Make in India.’

High Commissioner pointed out that it also demonstrated the commitment of Indian companies to stand with Sri Lanka during difficult times.

Sri Lanka’s banking sector maintains its vibrancy even amidst economic slowdown following Easter terror attacks.

The banking sector in Sri Lanka constitutes 33 banks and maintains assets totaling LKR 11.8 trillion as at end 2018.

The financial system is dominated by the banking sector accounting for nearly 60 per cent of the total assets of the financial system.

At present, the banking sector is mainly funded by deposits accounting for more than 70 per cent of the total assets, whilst shareholders contribute to approximately 8.7 per cent of total assets.

Disagreeing with negative reporting on the bank performances, Prime Minister Ranil Wickremesinghe argued that the Sri Lankan economy has expanded over the last four years, with growth of total public savings increasing by over 80% as reflected in bank holdings.

Speaking at the 80th anniversary of the Bank of Ceylon (BOC), he emphasised that the current economic situation, when compared to that of 2015, was vastly improved.

Presently, four banks of Sri Lanka are ranked among the top 1000 banks in the world, according to the Banker Magazine, UK. Considering the important role played by the banking sector in the financial system and the economy of the country.

The Central Bank continues to introduce prudential policy measures and regulations based on internationally adopted regulations and best practices, to further strengthen the stability and sustainability of the banking sector, as any stress in the banking sector can adversely impact the economy.

Sri Lanka has embarked on an ambitious endeavor in attracting more foreign investors to enter into partnerships and make investments in a big way following the set back caused by Easter terror attacks.

With a view of supporting this initiative, The Ceylon Chamber of Commerce will be organizing the Sri Lanka Investment and Business Conclave 2019, under the theme “Explore: Network: Capitalise”, on 16th September 2019, for the fourth consecutive year at the Shangri-La Colombo.

It will be supported by Ministries of Development Strategies and International Trade, Ministry of Foreign Affairs, Finance, Industry and Commerce, Board of Investment of Sri Lanka, the Department of Commerce and the Sri Lanka Export Development Board.

The event is also supported by the International Finance Corporation a member of the World Bank Group, as the Knowledge Partner.

The Sri Lanka Investment & Business Conclave 2019 offers the perfect blend of opportunities aimed at enriching institutional, corporate and individual investors and business houses with a comprehensive set of guidelines for their investment decisions.

It will act as a networking opportunity for introductions to potential overseas business partners with a view of establishing partnerships/investments in Sri Lanka.

New urbanization initiative with new opportunities for investment has open doors for potential investors to set up joint ventures in Sri Lanka.

It boasts for being one of the lowest corporate tax rates in the region including strong policies in place for protecting international investors and business partners ensuring high quality of Life for foreign investors.

The Sri Lankan government offers many attractive facilities to investors to setup joint ventures in Sri Lanka.

Focus sectors for investment includes Agriculture, Apparel, Education, Export Manufacturing, Export Services, Infrastructure, Knowledge Services, Tourism and Leisure, Power & Energy, Telecommunications and Related Services, Ports Development, Distribution of Petroleum related products such as LPG & LNG and Recycling of Waste etc.

Partnering with two of Sri Lanka’s cricketing legends, Mahela Jayawardena and Kumar Sangakkara, VirTrans Capital today launched YOUCAB and SYTRANS, the latest player in the Island’s e-Transport hailing game.

The soft launch of the product was held at the beginning of this year amidst a gathering of media and well-wishers.

Superior Transport Services began at a ceremony with the participation of a large cross-section of Colombo’s elite, media personnel and the company’s top brass.

Since the soft launch, YOUCAB and SYTRANS has been in the process of identifying drivers who fit in with the ethos of the company, while also providing road network, driving methods and soft skills training to new recruits. The company has invested heavily on the training and development aspect of the business recognizing a need for superior customer service in the transport sector.

“Our aim is not to simply be a transport solution provider but also someone that people can trust and rely on. As a brand we want to be identified with the same values of humility, trust and reliability that is personified by our two strategic partners Kumar Sangakkara and Mahela Jayawardene," said Thushan Jayaratne, the Chief Operating Officer of YOUCAB.

YOUCAB is the latest addition to the Island’s e-Taxi hailing mobile application market. Customers will be able to book a taxi, ranging from three-wheelers to luxury sedans and Vans using the YOUCAB mobile app or by calling the 24/7 hotline. As an intermediary online platform, YOUCAB will connect passengers in search of affordable and reliable transportation, with service partners registered across multiple vehicle categories, providing travel solutions on a real time basis.

Singer, the country’s premier consumer product retailer has been appointed as the DELL Technologies commercial distributor in addition to the DELL Consumer distributor status which Singer currently holds.

As the DELL Technologies commercial distributor, Singer will distribute DELL commercial products to authorized resellers island wide empowering them to cater to both Government and Private sector through DELL’s latest technologies.

Through the past years, Singer has transformed in to a technological powerhouse with an impressive array of products enhancing its marketing capabilities in selling computers, tabs, mobile phones and so on.

Formerly, Singer partnered with DELL in 2014 as a Large format retailer and distributor for consumer products and embarked successfully which eventually crowned Singer as the most coveted Best Consumer Distributor for FY2018 and FY2019 at DELL Technologies Partner Awards.

Workspace transformation is taking place and trends are changing hence Singer is getting ready to cater to the needs of the government and private organizations for the future with this partnership to be able to cater any requirement/need in the industry.

Mahesh Wijewardene - Group CEO of Singer Sri Lanka PLC stated, that Singer is on a new journey to fetch world’s latest technology and be a part of the workforce transformation journey in the Sri Lanka.

Sri Lanka’s Premier blue chip company John Keells Holdings PLC (JKH) reported a major growth of 5%, with most sectors except leisure performing well, whilst the bottom-line declined sharply largely due to non-operational factors.

Consolidated revenue in the first quarter of FY19/20 grew by 5% to LKR 31.74 billion. The Group earnings before interest, tax, depreciation and amortisation (EBITDA) at LKR 4.04 billion was a decrease of 10% over the adjusted EBITDA of LKR 4.51 billion recorded in the previous financial year.

The Group profit before tax (PBT) at LKR 1.36 billion was down 53% and the profit attributable to equity holders was lower by 55% to LKR 994 million. JKH, in a statement, said profits for the quarter were mainly impacted by the non-cash expense arising from the adoption of SLFRS 16 and the decline in finance income at the Holding Company.

It said the Transportation, Consumer Foods and Retail industry groups continued their growth momentum from the previous quarter, despite the disruptions post-Easter Sunday terror attacks, which occurred early in the quarter. The latter significantly impacted the performance of JKH’s leisure sector.

The performance of the Group is after adjusting for the new Accounting standard SLFRS 16 which came to effect this year, for fuller disclosure. Accordingly, EBITDA in 2018/19 is comparatively adjusted for the impact of SLFRS 16, on a like-with-like basis against the EBITDA in 2019/20 (adjusted EBITDA).

The government continues its initiative of assisting Sri Lankan companies to enter into the massive Indian market.

The Ministry of International Trade and Development Strategies has already launched the ‘Break into India’ strategy in which the request for proposals was published by the Export Development Board (EDB) this week.

A report titled ‘Entering the Indian market: Lessons from Sri Lankan firms that did it’ looks into the strategies used by about 30 companies to establish themselves, and is the first in a two-step process to encourage more Sri Lankan companies to tap into the Indian market.

An international expert will be recruited to conduct research that provides any current or prospective Sri Lankan exporter or investor into India with in-depth market entry knowledge, including mapping of entry requirements, regulatory frameworks, institutions and market potential to ease of doing business with India.

It has also been planned a business-to-business facilitation where market linkages will be forged for Sri Lankan businesses in priority sectors in India.

The Sri Lankan government will be urging Indian investors to form joint ventures with their counterparts from Sri Lanka's private sector for ventures in India with a view to facilitating the entry of Sri Lankan products, brands and companies into India.

During the past few years, Sri Lankan exports to India of some other products were also subjected, from time to time, to various forms of ‘administrative protection.'

These restrictions include stringent food safety regulations, delaying customs clearance and changes made in the list of ports demarcated for the entry of Sri Lanka goods.

There is also anecdotal evidence that some Sri Lanka exporters have begun to avoid the FTA and export under the 'most favoured nation' (MFN) tariffs because of the cumbersome and costly procedures involved in obtaining RoO certificates and delays in import clearance at the Indian ports.

Next Hotel Colombo featuring Kafnu will be opening its doors to visitors both here and overseas in the fourth quarter this year marking the revival of tourism and business in Sri Lanka erasing the bitter memories of Easter terror.

The hotel is the perfect launch pad to explore the rich culture and natural beauty of Sri Lanka and it is also among the best venues in Colombo for corporate meetings, Next Story Group company officials said.

Next Story Group creates and transforms urban spaces into thriving communities by harnessing the power of human imagination and innovation.

The Group is currently expanding across Asia Pacific markets in 2019 with its successful hotel brand Next Hotels and genre-defining urban lifestyle concept, Kafnu.

Next Hotel Colombo will be located in the iconic Colombo City Centre, a premier lifestyle destination in Sri Lanka.

Colombo City Centre is a mixed-use development which consists of a Next Hotel, luxury apartments and the first international shopping mall in the country.

The hotel provides direct access to this upscale mall which has more than 50 international brands, 20 food and beverage outlets, a six screen cineplex and a virtual reality world.

Next Hotel Colombo will occupy the 8th to the 17th floor of the iconic 47-storey building within Colombo City Centre.

The hotel will showcase the hallmarks of the upper upscale Next Hotels brand, which offers modern, innovative hospitality and focuses on empathetic and efficient service to deliver a uniquely stimulating experience with every visit.

Public areas and the Kafnu space within the hotel will be designed to be engaging and will provide the right ambience to encourage guests to share experiences and ideas.

Next Hotel Colombo will have 164 guest rooms and suites over 8 floors from the 10th floor, with stunning views of the city skyline and the India Ocean.

The hotel is also the ideal venue for corporate meetings and social functions for up to 100 guests.

Colombo is known as the world’s No.1 “must photograph” destination. It has also been ranked top place to travel to in the world in 2019 by Lonely Planet.

Next Hotel Colombo will feature the first Kafnu within a Next Hotel. Conceptualized as an urban village for the new generation of creators, Kafnu is a physical, intellectual and social launch pad for today’s trailblazers.

It is designed for its members to co-create, co-explore and collaborate in an open and supportive environment that elevates their individual and collective potential.

Kafnu members enjoy access to strategic partnerships, premium services and private events.

A members-only club, Kafnu Colombo will join the Kafnu network which includes Hong Kong, Taipei, Bengaluru, Ho Chi Minh City and Sydney.

The French ambassador to Sri Lanka and the Maldives, Mr. Eric Lavertu was ceremonially handed over the keys to the latest Peugeot 5008 SUV by Carmart (Pvt) Ltd recently.

Carmart (Pvt) Ltd is the sole manufacturer and authorized importer/distributor in Sri Lanka for the world-renowned European vehicle brand Peugeot.

Speaking at the event Mr. Lavertu said, "Peugeot is a very successful brand in France and across the globe. It is well known for its versatility, design and durability. It has also won many awards and car races in Europe and all around the continents."

The Peugeot 5008 is an award-winning vehicle globally and has enjoyed great success locally as well. Carmart has seen exponential growth in sales numbers of the top-selling European SUV in its range with the company recording close to 300 registrations in 2018 alone. This makes the Peugeot SUV range the most popular European brand-new SUV range in Sri Lanka.

Speaking at the ceremony, Director/CEO of Carmart Yasendra Amerasinghe said, “the 5008 continues to flourish in the SUV market globally, winning many awards for its engine, durability, practicality, and styling."

"Peugeot SUVs have created a great deal of interest in the market as these vehicles represent outstanding value for money," he added.

The Peugeot SUV range can be experienced at the Peugeot Blue Box showroom at 424 Union Place, Colombo 2, which is open seven days a week.

The Commercial Bank of Ceylon recently received the coveted Best Bank of the Year in Sri Lanka award for the ninth time at the prestigious FinanceAsia Country Awards gala. At the event held in St. Regis Hotel, Hong Kong, the Bank was represented by Mr Prins Perera, Deputy General Manager – Treasury, who accepted the award on behalf of the Bank.

The Finance Asia Country Awards are based on the respective banks’ performance, encompassing key events of the year, financial results including profits, NPL ratios, provisioning, return on equity, capital adequacy ratios, total assets, loans, deposits, branch network, vision and long-term strategy, market position versus the nearest competitor, principal sources of profit, and feedback of stock market analysts.

Cover image: Mr Prins Perera with FinanceAsia’s ‘Best Bank’ award for Sri Lanka.

Dentsu Grant Group has announced the launch of Amnet, the programmatic expert from Dentsu Aegis Network, in Sri Lanka. Amnet is a trusted source for programmatic buying and audience management solutions. Amnet comprises a team of programmatic experts from the Dentsu Aegis Network, who specialize in programmatic buying, programmatic media planning, data analytics and audience data. Amnet’s mission is to build and leverage data, in order to deliver more meaningfuland personalized messaging insights.

With the launch of Amnet, Denstu Grant Group is once again set to disrupt the status quo of digital advertising through expanding local media inventory and offering more sophisticated, customized campaigns to clients. Among othermarkets, Amnet has a presence in India, USA, UK, France, China and Hong Kong. For the record, Dentsu Grant Group is the oldest serving advertising group in Sri Lanka that was acquired by Dentsu Aegis Network, the global media and marketing communications conglomerate, in 2017.

Speaking on the launch, Shamsuddin Jasani, Group MD, Isobar South Asia and Executive Sponsor AMNET South Asia states, “Sri Lanka’s advertising trends have considerably shifted from traditional to digital advertising behaviour within a short span of time. As a leading global player in digital, we wanted our clients to get the best of global standards in this important area; hence, the decision to bring Amnet to Sri Lanka.”

"It's been an incredible year for Dentsu Aegis Network in Sri Lanka...constantly innovating and disrupting the local advertising industry. After successfully becoming the fastest growing digital agency in the country this year, we asked ourselves, what could we do next? Embracing data is in the DNA of our network and what we have been spearheading here in Sri Lanka as a business. So, we are thrilled to announce the launch of Amnet, one of the premier programmatic platforms available in the world to-date. This is the next wave in media planning and buying in this country and is yet another achievement we can add to our long history of establishing industry firsts," commented Neela Marikkar, Chairperson and Managing Director, Dentsu Grant Group.

"With client needs evolving for quicker turnarounds and data-driven marketing at scale, we needed to get the best of global standards in this important area; hence, the decision to bring Amnet to Sri Lanka. This is head-and-shoulders above anyone else in the market on Programmatic media buying," said Chamith Buthgumwa, Director Isobar, Sri Lanka & Response at Dentsu Aegis Network.

Nisal De Silva, Associate Director from Isobar Sri Lanka, will lead the digital programmatic operations for Amnet in Sri Lanka.

Fitch Ratings has revised the Outlook on Mercantile Investments and Finance PLC (MIF) to Negative from Stable and has affirmed the ratings.

At the same time, Fitch has affirmed the ratings of the following Sri Lankan finance companies:

- Central Finance Company PLC (CF)
- LB Finance PLC (LB)
- Senkadagala Finance PLC (Senka)
- People's Leasing & Finance PLC (PLC)

The rating actions follow Fitch's periodic review of Sri Lanka's large and mid-sized finance companies.

Mercantile Investments and Finance PLC:

National Long-Term Rating affirmed at 'BBB-(lka)'; Outlook revised to Negative from Stable

Central Finance Company PLC:

National Long-Term Rating affirmed at 'A+(lka)'; Outlook Stable
Senior secured National Long-Term Rating affirmed at 'A+(lka)'

LB Finance PLC:

National Long-Term Rating affirmed at 'A-(lka)'; Outlook Stable
Senior unsecured National Long-Term Rating affirmed at 'A-(lka)'
Subordinated debt National Long-Term Rating affirmed at 'BBB+(lka)'

Senkadagala Finance PLC:

National Long-Term Rating affirmed at 'BBB+(lka)'; Outlook Stable
Senior unsecured National Long-Term Rating affirmed at 'BBB+(lka)'
Proposed subordinated debt National Long-Term Expected Rating affirmed at 'BBB(EXP)(lka)'

People's Leasing & Finance PLC

Long-Term Foreign-Currency Issuer Default Rating affirmed at 'B-'; Outlook Stable
Long-Term Local-Currency Issuer Default Rating affirmed at 'B-'; Outlook Stable
National Long-Term Rating affirmed at 'AA-(lka)'; Outlook Stable
Senior unsecured National Long-Term Rating affirmed at 'AA-(lka)'

A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS
NATIONAL RATINGS

Fitch expects Sri Lankan non-banking financial institutions to continue to face pressure on asset quality and profitability in the medium term. The sector's non-performing loan (NPL) ratio (overdue more than 180 days) spiked to 7.7% by March 2019, from 5.9% at March 2018, with the target customer base suffering from the economic slowdown, which we expect to continue throughout the financial year. Higher taxes on financial institutions lowered sector profitability by 28% during the financial year ending March 2019 (FY19), in addition to the impact of rising credit costs from weakening asset quality and the adoption of SLFRS 9.

The ratings of the finance companies in the peer group are driven by their high-risk appetite, as reflected in the companies' predominant exposures to more vulnerable customer segments. The ratings are highly sensitive to asset quality trends and our assessment of capital availability to absorb this stress.

Finance Companies with Ratings Driven By Intrinsic Strength

MIF
The Negative Outlook on MIF's National Long-Term Rating reflects our expectation that MIF's capital buffers could deteriorate further from pressure on its already-weak asset quality and below-average earning generation.

MIF's National Long-Term Rating reflects its high-risk appetite, which stems from its weak underwriting standards, evolving risk controls and high reliance on concentrated short-term funding that has led to considerable negative maturity mismatches. The rating also takes into consideration the company's long operating history.

MIF's asset quality, as measured by its reported six-month regulatory gross NPL ratio, further deteriorated to 9.6% (FY18: 7.6%) and stood above the sector's 7.7% at end-FY19. We expect MIF's NPL ratio to remain elevated in the medium-term due to operating environment challenges, despite potentially significant recoveries on its single largest NPL (backed by collateral), which accounts for around 4% of gross loans.

We believe MIF's concentrated deposit-base and reliance on short-term funding pose a risk to its funding profile, particularly in a challenging operating environment. Short-term funding comprised 75% of total funding at end-FY19 (FY18: 71%) and, in our view, its unutilised credit lines do not adequately cover the negative maturity mismatches. We expect deposits to remain a major funding source for MIF (FY19: 70% of funding).

CF
CF's rating reflects its high risk appetite stemming from its retail-centric loan book, which is concentrated in registered three-wheelers; and weakened asset quality. This is partly mitigated by CF's healthy capitalisation, supported by above-industry profitability. The rating also captures CF's established franchise, which is underpinned by solid market share and a long operational record of 61 years in the domestic market.

CF's reported six-month regulatory gross NPL ratio surged to 5.6% in FY19 (FY18: 3.7%), but remained lower than that of the sector. We expect further downside risk to asset quality given CF's aggressive loan growth of 19.1% in FY19 with a back drop of a weakened operating environment. Notwithstanding, CF's better-than-peer capitalisation should counterbalance any credit shocks. CF remains Sri Lanka's highest-capitalised licensed finance company, with regulatory Tier 1 and total capital ratios of 26.0% and 25.9%, respectively, at end-FY19.

LB
LB's rating reflects its established franchise, high profitability from high yielding products and satisfactory capital levels. This is counterbalanced by the company's high risk appetite due to a large exposure to gold-backed lending.

LB's balance-sheet leverage remains the highest among large peers, with debt/tangible equity of 6x. Some moderation is likely in the medium term, with the company's internal capital generation outpacing slower loan growth. LB's regulatory capital ratios remain in line with those of peers due to its exposure to capital-efficient products, such as gold-backed lending.

LB's gold-loan exposure increased by 28% in FY19, to account for 22% of gross loans (FY18: 19%), partly compensating for the slowdown in leasing. We believe the high exposure to gold-backed lending could pose a threat to asset quality due to potential volatility in gold-prices, but the exposure has so far been managed through active monitoring and risk-control measures.

Senka
Senka's rating reflects its high risk appetite stemming from its SME-centric loan book and lower financial flexibility compared with peers due to a heavy reliance on secured wholesale funding. This offsets any potential benefits stemming from Senka's established franchise in the domestic vehicle-financing sector and well-matched maturity gaps.

Senka's asset quality witnessed sharp deterioration in FY19, similar to peers, reflecting a high exposure to the SME segment, which is highly susceptible to the prevailing weak operating environment. Its reported six-month regulatory gross NPL ratio surged to 4.9% in FY19, from 2.3% in FY18, although it remains better than that of the sector. We expect asset-quality pressure to persist in FY20, as a meaningful economic recovery is not probable in the short term.

Senka's heavy reliance on secured funding is likely to further limit its financial flexibility, especially in distressed-market conditions. Its unsecured debt/total debt ratio was low at 44.7% in FY19 due to a low share of deposits (33.2% of total funding at FYE19) in the funding mix compared with peers.

Finance Companies with Institutional Support-Driven Ratings

PLC
PLC's Issuer Default Ratings (IDR) and National Long-Term Rating reflect Fitch's view that its parent, the state-owned and systemically important People's Bank (Sri Lanka) (AA+(lka)/Stable), would provide PLC with extraordinary support, if required. People's Bank's propensity to support PLC stems from PLC's group role and integration as a strategically important subsidiary of People's Bank; PLC accounted for 9.8% of People's Bank's assets at FYE19. PLC also has 92 window offices within People's Bank branches and has board representation from People's Bank.

There is high reputational risk to People's Bank should PLC default, as the bank holds 75% of PLC and shares a common brand. People's Bank's ability to provide support to PLC is limited and stems from Sri Lanka's rating of 'B'/Stable.

DEBT RATINGS
The ratings on the senior debentures of LB, Senka and PLC are in line with the companies' National Long-Term Ratings, as they rank equally with claims of the company's other senior unsecured creditors.

Fitch has not provided any rating uplift for the collateralisation of CF's senior secured notes, as we consider recovery prospects to be average and comparable with that of unsecured notes in a developing legal system.

The subordinated debentures of LB and proposed subordinated debentures of Senka are rated one notch below the companies' National Long-Term Ratings to reflect their subordination to senior unsecured creditors.

RATING SENSITIVITIES
NATIONAL RATINGS

Finance Companies with Ratings Driven By Intrinsic Strength

MIF
The Outlook on MIF's National Long-Term Rating may be revised to Stable if the company can sustain capital buffers to sufficiently cushion its weaker asset quality amid higher operating environment-related risks. MIF's ratings could be downgraded if it experiences higher capital impairment due to sustained deterioration in asset quality and profitability or if its large maturity mismatches were to widen.

CF
CF's ratings could be upgraded if its risk appetite moderates, which Fitch does not expect in the medium term. The rating could be downgraded if capital buffers are substantially eroded due to weakening asset quality and prolonged rapid growth in the more vulnerable customer segments.

LB
Downgrade triggers for LB include heightened risk appetite or capital pressure from weaker profitability. This could be indicated through aggressive loan growth or deterioration in asset quality. An upgrade is contingent on LB achieving stronger capitalisation, lower-risk asset exposure and a more comfortable liquidity position.

Senka
An upgrade of Senka's rating is contingent upon the company sustaining stronger capital levels and improved financial flexibility through a more robust deposit franchise. Senka's rating could be downgraded if asset quality weakens, leading to a significant decline in capitalisation or excessive asset encumbrance.

Finance Companies with Institutional Support-Driven Ratings

PLC
A downgrade of PLC's IDRs and National Rating would occur if People's Bank's ability to support PLC was to weaken, if People's Bank was to cede its majority ownership in PLC or if PLC's strategic importance to its parent was to diminish over time, reflecting a reduced propensity to support PLC. However, Fitch does not anticipate this in the long term. PLC's ratings are also sensitive to changes in the sovereign rating, as this would affect People's Bank's ability to provide support to PLC.

DEBT RATINGS
The ratings on the senior debt of CF, LB, Senka and PLC will move in tandem with the companies' National Long-Term Ratings.

The assigned subordinated debt ratings will move in tandem with the National Long-Term Ratings.