May 24, Colombo: Fitch Ratings Lanka has recently affirmed Ceylease Financial Services Ltd's (CFSL) 'BBB-(lka)' national rating and outlook as stable.

CFSL's rating factors in the implied support assumed to be available from its key shareholder, Bank of Ceylon (BOC, 'AA(lka)'/Stable), which owns 50% of CFSL. As of FYE07, CFSL accounted for 12.7% of the BOC group's entire leasing portfolio. CFSL maintains a close relationship with BOC, benefiting from common board representations and committed funding lines which amount to 52% of its total borrowings. CFSL's rating is constrained by its low profitability, small asset base, modest asset quality and high credit concentrations.

Over the last five years, CFSL has gradually moved away from its historical focus on equipment leasing to motor vehicles in order to achieve growth targets. As of December 2007 the company's exposure to motor vehicles had increased to 82% of its total portfolio from just over 54% in FY03. CFSL opened a new branch in Kandy in September 2007 in an attempt to diversify its geographical outreach and product base. The Kandy branch is involved in the purchase and sale of real estate in addition to conducting leasing and hire purchase operations.