Fitch assigns Sampath Bank’s Basel III Sub Debt final rating of A(lka)

Fitch Ratings Lanka has assigned Sampath Bank PLC’s (AA-(lka)/Stable) proposed Basel III-compliant subordinated unsecured debentures a National Long-Term Rating of ‘A(lka)’.

The final rating is the same as the expected rating assigned on 8 February 2021, and follows the receipt of documents conforming to information already received.

The proposed debentures will mature in seven years and will be listed on the Colombo Stock Exchange. The bank expects the proposed subordinated debentures to qualify as Basel III-compliant regulatory Tier 2 capital. The proposed debentures include a non-viability clause whereby they will convert to ordinary voting shares if non-viability of the bank is determined by the Monetary Board of Sri Lanka. The bank plans to use the proceeds from the debentures to strengthen its Tier II capital base and support the expansion of its loan book.

KEY RATING DRIVERS

Sampath’s proposed and outstanding Sri Lankan rupee-denominated subordinated debt is rated two notches below the National Long-Term Rating anchor. This reflects Fitch’s baseline notching for loss severity for this type of debt and our expectations of poor recoveries. There is no additional notching for non-performance risks.

Fitch affirmed Sampath’s National Long-Term Rating on 5 August 2020.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

– Sampath’s subordinated debt would be upgraded if the bank’s National Long-Term Rating is upgraded.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

– Sampath’s subordinated debt would be downgraded if the bank’s National Long-Term Rating is downgraded.