Fitch Ratings has assigned DFCC Bank PLC’s (DFCC; AA-(lka)/Negative) Basel II-compliant subordinated debentures of up to LKR7bn a final National Long-Term Rating of ‘A+(lka)’.
The final rating is the same as the expected rating assigned on 27 September 2016 and follows the receipt of documents conforming to information already received.
The debentures, with tenors of five and seven years and carry fixed coupons, will be listed on the Colombo Stock Exchange. DFCC expects to use the proceeds to strengthen its Tier II capital base and manage maturity mismatches.
KEY RATING DRIVERS
The subordinated debentures are rated one notch below DFCC’s National Long-Term Rating to reflect the subordination to senior unsecured debt.
DFCC’s rating captures its developing commercial banking franchise and still-high capitalisation. Its weaker asset-quality compared with better-rated peers weighs on its rating. The Negative Outlook on DFCC’s National Long-Term Rating reflects weakening capital buffers that stem from weaker asset-quality metrics, increased loan growth and below-average internal capital generation.
The ratings on the debentures will move in tandem with DFCC’s National Long-Term Rating.