Fitch assigns “A” rating with Positive Outlook for Sampath Leasing and Factoring

Fitch Ratings Lanka Limited has assigned an “A (lka)” National long-term rating with a positive outlook for Sampath Leasing and Factoring Ltd. (SLFL), a fully-owned subsidiary of Sampath Bank PLC.

SLFL is a specialised leasing company, which was established in 2005 to service the SME and retail segments.

Commenting on the rating assigned by Fitch Ratings Lanka, SLFL Chairman Arthur Senanayake stated: “The company has now established itself in a profitable and niche market within an intensely competitive leasing market. This will open new vistas of opportunity for the company paving the way to introduce innovative product variants to its core products – leasing and factoring.  I am sure that SLFL will be a vibrant company within the Sampath Bank Group.”

Fitch Ratings in its rating report has positively commented on the support available to SLFL from its parent company through strategic and operational linkages, which augurs well for synergies between the two companies.

Sampath Bank PLC Managing Director and SLFL Director Aravinda Perera said: “SLFL’s contribution to the Group profits has increased significantly and its performance is augmented by drawing on the core strengths of Sampath Bank; in particular its wide geographical presence. The company’s affinity to the strong ‘Sampath’ brand image would enable it to create a significant market presence in the industry.”

Fitch in its rating report has highlighted that SLFL reported a strong return on assets in 2010 and 2011 (6.5% and 7.0% respectively) helped by an equity infusion in 2009, revamped systems and processes including focused recoveries in 2010 and a strong loan growth in 2011. As a result net interest margin increased, while loan loss provisions were reversed.  

Sampath Bank Group Chief Financial Officer/Executive Director Ranjith Samaranayake explained: “The company has demonstrated a strong track record of performance during the last two years resulting in significant improvement in the key performance indicators and a concerted focus on structural improvements to credit and recoveries.”

CEO Roshan Nanayakkara said: “The company has focused on managing its credit expansion, without compromising on credit quality. It has revamped its systems with the introduction of a new state-of-the-art IT system, which could be a benchmark for the industry.”

The company has had two successful years of operation, reporting after tax profits of Rs. 127 million and Rs. 192 million for the financial years 2010 and 2011 respectively. The company was also recently recognised for its prudent financial reporting standards and corporate governance practices by being awarded the Silver award in the ‘Specialised Leasing Company Category’ at the Best Annual Report Competition organised under the aegis of the Institute of Chartered Accountants of Sri Lanka.

The Fitch report also stated that SLFL’s asset quality has improved considerably in its leasing portfolio. The report further reiterated that selective lending and close monitoring of factoring clients has enabled SLFL to maintain good asset quality in its factoring portfolio as well.

The report also added that SLFL’s risk appetite for potential credit losses in its factoring portfolio is low.

The report highlights that net six month NPA/equity was strong at a low 0.2%, more a reflection of good credit management combined with a rapid loan growth in 2011, than high capitalisation. The report also concedes that SLFL’s capitalisation is marginally higher than the average of 16.1% for non bank financial institutions rated by Fitch.

The full report could be referred in the websites www.fitchratings.lk and www.fitchratings.com.