🇱🇰 Banking: Fitch Places HDFC & SMIB on 'Rating Watch Positive' Following Acquisition Plan 📈

• Fitch Ratings has placed the National Ratings of Housing Development Finance Corporation (HDFC) ('BB+(lka)') and State Mortgage & Investment Bank (SMIB) ('BB(lka)') on Rating Watch Positive (RWP). • The RWP action follows the government's proposal for the transfer of all state-owned shares: • HDFC to Bank of Ceylon (BOC). • SMIB to People's Bank (PB). • Key Driver: The acquisitions are expected to result in a very high likelihood of support from the new, stronger parent banks, which Fitch will reflect via support-driven National Ratings. • HDFC Context: HDFC's rating was previously on a Negative Outlook due to regulatory restrictions on deposit mobilisation and selected lending, affecting its competitive position, particularly in the EPF-backed housing loan segment. • SMIB Context: SMIB's capital position remains below the regulatory minimum of LKR 7.5 Bn, with a shortfall estimated at LKR 2 Bn - 3 Bn (based on June 2025 financials). • Outlook: RWP is expected to be resolved upon completion of the transaction, which could lead to a multiple-notch upgrade for both banks, reflecting the financial strength of the new owners (BOC/PB).