Monday 26 October 2015

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

(LBO) – Fitch Ratings has assigned Sri Lanka’s Sampath Bank PLC’s Base lI-compliant subordinated debentures of up to seven billion rupees , a final National Long-Term Rating of ‘A(lka)’.

The final rating is the same as the expected rating assigned on 9 October 2015, and follows the receipt of documents conforming to information already received, the rating agency said.

The debentures will mature in five years and carry fixed and floating coupons.

Sampath Bank plans to use the proceeds to strengthen its Tier 2 capital base and match the duration of the assets and liabilities in its long-term lending portfolio. The debentures are to be listed on the Colombo Stock Exchange.

Fitch Rating’s rating drivers are given below :-

KEY RATING DRIVERS

The issue is rated one notch below Sampath Bank’s National Long-Term Rating to reflect the subordination to senior unsecured creditors.

Sampath Bank’s rating reflects its lower capitalisation relative to that of its peers and relatively higher risk appetite, which offset benefits from the growth of its franchise. The Outlook is Stable.

RATING SENSITIVITIES

The rating on the proposed debentures will move in tandem with Sampath Bank’s National Long - Term Ratings.

Fitch views the upside potential of Sampath Bank’s ratings as limited as long as the trend of higher risk-taking and declining capitalisation persists. A sharp decline in its asset quality could result in a rating downgrade.

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