Credit Lift

Aug 31, 2010 (LBO) – The outlook on Sri Lanka’s Sampath Bank’s ‘AA-(lka)’ ratinghs been lifted to ‘positive’ from ‘stable’ on improving risk management ahead of other banks, Fitch Ratings has said. Its subordinated debenture rating (one notch lower) reflected the relatively lower recovery prospects for investors of this instrument compared to the bank’s senior creditors. The support rating reflected the state support that Sampath would get if warranted, and is a function of the state’s ability and willingness to extend such support.

Fitch says Sampath has managed the recovery of its non performing loan (NPL) stock better than most of its peers.

Its NPLs had fallen 23 percent on an absolute basis in year-ended June 2010, with only negligible write-offs and an average level of rescheduled exposures compared to its peers.

The bank expected further reductions in absolute NPLs from its continued recovery efforts and an improving macro-economic environment.

Strong recoveries along with the proportionate increase in pawning advances (gold-backed lending with virtually no bad loans) helped the bank to reduce its gross NPLs to 6.91 percent of loans at end-June 2010 (December 2008: 7.60