Sri Lanka’s Sampath Bank debt rated ‘A+(lka)

Nov 11, 2013 (LBO) – Fitch Ratings has given an ‘A+(lka)’ rating for a five billion rupee debt sale by Sri Lanka’s Samapth Bank in line with an expected rating given on October 31. The subordinated debt is rated a notch below the ‘A+(lka)’ rating given for senior debt. Outlook on the rating is stable.

The full statement is reproduced below:-

Fitch Rates Sampath Bank’s Subordinated Debt Final ‘A+(lka)’

Fitch Ratings-Colombo/Hong Kong/Singapore-11 November 2013: Fitch Ratings Lanka has assigned Sampath Bank Plc’s (SB; AA-(lka)/Stable) proposed subordinated debentures of up to LKR5bn a final National Long-Term Rating of ‘A+(lka)’. The debentures have tenors of up to five years with fixed coupons.

The assignment of the final rating follows the receipt of documents conforming to information previously received. The final rating is the same as the expected rating assigned on 31 October 2013.

KEY RATING DRIVERS

The proposed debentures are rated one notch below SB’s National Long-Term Rating of ‘AA-(lka)’ to reflect their gone-concern loss-absorption quality in the event of liquidation, in line with Fitch’s criteria for rating such securities.

RATING SENSITIVITIES

The subordinated debt rating will move in tandem with the Long-Term Ratings.

SB’s ability to establish and sustain an enhanced franchise alongside credit metrics commensurate with higher-rated domestic peers could result in an upgrade. However, this is less likely over the medium term, given SB’s higher risk profile relative to higher-rated peers and challenging economic conditions.

SB could be downgraded if there is an increase in risk appetite, for instance through aggressive lending or weakening of underwriting standards that could put pressure on its credit profile. Fitch would also consider negative rating action on SB if there is a substantial and sustained decline in asset quality that may exert pressure on its capitalisation.