Sri Lanka's Commercial Bank's upcoming billion rupee debenture issue secured an AA (sri) rating from Fitch Ratings Lanka, the agency said Wednesday. The bank initially plans to raise Rs.
1.0 billion with an option to raise Rs.
500 million more in the event of an oversubscription.
The five-year unsecured subordinated redeemable debenture will raise money to feed its medium term credit expansion.
The AA (sri) rating is one notch lower than Commercial Bank's implied senior debt rating of 'AA (sri)'.
"The subordinated debentures, in terms of priority, will rank below deposits and all senior debt obligations, but will rank above ordinary and preference shares," Fitch said in a statement.
Sri Lanka's second largest private bank in terms of assets (Rs.
154 billion as at June 30, 2005), Commercial Bank's strengths lie in corporate banking, with a recent shift to retail and consumer business.
Profitability in terms of return of assets dipped marginally to 1.0 percent during first half of 2005 compared to 1.2 percent in financial year 2004, due to higher taxation and lower foreign exchange income.
The bank's asset quality has been maintained with gross non-performing loan (NPL) ratio of 4.
2 percent.
Solvency, as measured in terms of Net NPL/Equity ratio was 15.
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7 percent as at end June 2005, which compares well in the local context.
The bank's capital position is sound, with the Total Risk Weighted Capital Ratio estimated at 12.75 percent as at June 30, 2005 (Tier 1 – 10.
99 percent).
The proposed debenture issue qualifies as Tier II capital, and would further strengthen the bank’s regulatory capital.
Fitch Ratings Lanka Ltd is a joint venture between Fitch Ratings, USA, International Finance Corporation Washington, Sri Lanka's Central Bank and several other leading local financial institutions.
-LBO Newsdesk: LBOEmail@vanguardlk.com