Fitch revises Siyapatha Finance's outlook to Negative; affirms at 'A(lka)'

Fitch Ratings Lanka has revised the rating Outlook on Siyapatha Finance PLC (Siyapatha) to Negative from Stable and affirmed its National LongTerm Rating at 'A(lka)'.

The agency has also affirmed the expected National LongTerm Rating on Siyapatha's proposed senior unsecured redeemable debentures at 'A(lka)(EXP)' and affirmed Siyapatha's outstanding subordinated debentures at 'BBB+(lka)'.

The rating action follows the revision of the Outlook on its parent, Sampath Bank PLC (Sampath), to Negative from Stable on 22 June 2016.

Fitch continues to believe that support for Siyapatha would be forthcoming from Sampath, if needed.

This view is based on Sampath's 100% ownership of Siyapatha and involvement in the strategic direction of Siyapatha through board representation.

Siyapatha is rated two notches below its parent because of Siyapatha's limited role in the group's core

business. Sampath's leasing book accounted for just 7% of group advances at end2015, of which Siyapatha provided 33%. Siyapatha's contribution to group profit also remains low. Siyapatha's proposed senior debentures are rated at the same level as Siyapatha's National Long Term Rating. The issue ranks equally with the claims of the company's other senior unsecured creditors.

Siyapatha's subordinated debentures are rated one notch below Siyapatha's National Long Term Rating to reflect their subordination to senior unsecured debt.

Siyapatha's rating could change if Sampath's rating changes or if Siyapatha's strategic importance to the bank changes. Narrower notching could result from higher importance to the group through greatersynergies, shared branding, and closer operational integration while the bank retains majority ownership. The senior debt rating will move in tandem with the Siyapatha's National Long Term Rating.

The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(lka)' for National ratings in Sri Lanka. Specific letter grades are not therefore internationally comparable.

Additional information is available at www.fitchratings.com.

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