ICRA Lanka Withdraws Rating of Union Bank of Colombo PLC

InstrumentCurrent Rated Amount (LKR Mn) Rating Action
Issuer rating         N/A [SL] BBB (Negative); Withdrawn

Rating action

ICRA Lanka Limited (“ICRA Lanka”) has withdrawn the Issuer rating of [SL] BBB (pronounced SL Triple B) with Negative outlook assigned to Union Bank of Colombo PLC (“UBC”/ “the Bank”). The withdrawal is as a result of termination of rating agreement(s) entered into by UBC with ICRA Lanka, pursuant to the decision by ICRA Lanka to cease its business operations in Sri Lanka.

The termination of the rating agreement(s) is as per Rule 88(b) of the Credit Rating Agency Rules promulgated under the Securities and Exchange Commission of Sri Lanka Act No. 19 of 2021 (the “SEC Act”).

About the Company:

Union Bank of Colombo PLC (UBC), incorporated in 1995, is a small Licensed Commercial Bank (LCB) accounting for about 1% market share of the Sri Lankan banking sector assets as on December 31, 2021. After a Restructuring process in 2003, which included Union Bank transferring LKR 978 Mn of NPAs and LKR 600 Mn of Cash to an SPV in return for low-yielding long-term Deep Discount Bonds (DDB), the Bank has raised capital from various investors. The Bank was listed on the main board of the Colombo Stock Exchange with an IPO offering in March 2011. UBC acquired controlling interest in National Asset Management Limited (NAMAL) and The Finance and Guarantee Company Limited (TF&G), subsequently renamed UB Finance (a licensed finance company). As on December 31, 2021, it holds about 51% of the share capital in NAMAL and 92% share capital in UB Finance. In 2014, UBC received equity infusion of about LKR 11.4 Bn from Culture Financial Holdings Ltd (CFHL), an affiliate of the private equity investor Texas Pacific Group (TPG); CHFL presently holds about 70.8% of the equity share capital. CHFL also subscribed to about 218 Mn share warrants, which could result in further equity infusion, if exercised and, increase CHFL’s shareholding to 75%. Given the restrictions on Bank shareholdings in Sri Lanka, special approval was granted by Central Bank of Sri Lanka (CBSL) to CHFL to reduce the holding to 15% by 2029.

Rating history for last three years:

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