Implied Support

Oct 26, 2010 (LBO) – Sri Lanka’s Seylan Bank was assigned a ‘BBB+(lka)’ National Long-term rating for its proposed senior unsecured redeemable debentures of up to two billion rupees, Fitch Ratings Lanka said.

The rating agency also confirmed the bank’s National Long-term rating at ‘BBB+(lka)’ with a stable outlook while also confirming the bank’s 3.4 billion rupees outstanding subordinated debentures at ‘BBB(lka)’.

Seylan’s ratings continue to reflect implied state support, given the bank’s size and systemic importance, the rating agency said in a statement.

Active restructuring measures are being implemented within the bank by the new board
of directors and the stand-alone credit profile is on an improving trend.

However, Fitch said the bank is still weak, largely because its asset quality was eroded by weak governance and credit controls in the past.

The bank’s ability to improve and sustain its asset quality, net non-performing loans (NPL)/equity position, as well as its profitability at a level commensurate with a higher rating, could result in an upgrade of its ratings.

Although on an improving trend, Seylan’s high gross NPL ratio and net NPL/equity are still