Upgrade Potential

Sept 23, 2010 (LBO) – Fitch Ratings Lanka said it has raised the outlook on Sri Lanka’s Sampath Bank (SB) ˜AA−(lka)’ national longterm rating to positive from stable, indicating a potential for an upgrade in the next 1224 months. “This is based on structural improvements that have occurred within the bank since early 2009, across most spheres of risk management, which, in Fitch’s view, are helping to improve SB’s credit profile faster than that of its peers,” a statement said.

An upgrade will be contingent upon the bank’s ability to develop its franchise and achieve greater economies of scale, while maintaining its return on assets, asset quality and capital structure at levels commensurate with a higher rating, Fitch said.

The rating agency noted that SB has managed the recovery of its non-performing loan (NPL) stock better than most of its peers.

NPLs reduced by 23 percent on an absolute basis in the 12 months to endJune 2010, due to concerted recovery efforts.

“The bank expects further reductions in absolute NPLs, owing to its continued efforts and an improving macroeconomic environment,” Fitch Ratings said.

Strong recoveries, along with an increased share of pawning advances – goldbacke