Bank Rating

July 3, 2008 (LBO) – Fitch Ratings Lanka has confirmed Sampath Bank’s local long-term rating of ‘AA-(lka)’ with a stable outlook. It also confirmed the ratings on the bank’s outstanding unsecured debentures of 3.3 billion rupees at ‘A+(lka)’, and the bank’s Individual and Support ratings at ‘D/E’ and ‘5’.

“The ratings reflect Sampath Bank’s strong brand franchise among local Licensed Commercial Banks (LCBs), and its healthy capital position,” Fitch said in a statement.

The rating agency said the profitability of Sampath Bank, the sixth largest among the six systemically important LCB’s, is under pressure.

The bank’s pre-tax return on assets (ROA) declined to 2.39 percent at FYE07 from 2.98 percent at FYE06.

“The decline was due to contracting interest margins, increasing provisioning costs, and inflationary rises in operating costs during the period.”

The bank’s net interest margin reduced to 4.4 percent at FYE07 from 4.6 percent at FYE06, largely due to increased borrowing costs, consequent to the bank’s aggressive deposit mobilising exercise in FY07 amidst prevailing high market interest rates.