Fitch Ratings has maintained Abans Finance PLC’s National Long-Term Rating of ‘A(lka)’ on Rating Watch Evolving (RWE). The rating was placed on RWE on 7 October 2020.
KEY RATING DRIVERS
The RWE on Abans Finance has been maintained pending the completion of its proposed sale by its parent, Abans PLC. The potential sale of Abans PLC’s stake in Abans Finance, subject to the receipt of necessary regulatory approvals, was announced on 29 September 2020. It forms part of the Central Bank of Sri Lanka’s (CBSL) financial sector consolidation plan to avoid further deterioration of the financial position of licenced finance companies in Sri Lanka.
The RWE reflects our view that Abans Finance’s rating could be upgraded, downgraded or remain the same, depending on our assessment of the ability and propensity of its new parent to support Abans Finance and the standalone credit strength of Abans Finance.
Abans Finance’s intrinsic financial strength is significantly weak due to a small franchise, limited operating history and high-risk appetite.
Abans Finance’s rating is driven by our expectation of support from Abans PLC. The rating reflects Fitch’s view that support would continue to be forthcoming from Abans PLC, if needed, until any change of ownership occurs. Our expectation stems from Abans PLC being the largest shareholder in Abans Finance, the parent’s involvement in strategic decisions through board representation and a common brand name. Abans Finance is rated three notches below its parent because of its limited role in the group and the parent’s decreased shareholding in its subsidiary.