Fitch rates DFCC’s Senior Debt at ‘AA- (EXP)’

Fitch Ratings has assigned DFCC Bank PLC’s (DFCC; AA- (lka)/Stable) proposed Sri Lanka rupee-denominated senior debentures an expected National Long-Term Rating of ‘AA-(lka)(EXP)’.

The notes, which will total Rs. 10 billion, will mature in five, seven and 10 years and carry fixed coupons. The bank plans to use the proceeds to support its loan expansion and to better manage its assets and liability mismatches. The debentures are to be listed on the Colombo Stock Exchange. The final rating is subject to the receipt of final documentation conforming to information already received.

Key rating drivers

DFCC’s National Long-Term Rating captures its developing commercial-banking franchise, relatively weak asset quality and earnings, and our expectation that DFCC would maintain higher capital buffers than similarly rated peers.

Rating sensitivities

The bank’s senior debt ratings will move in tandem with its National Long-Term Rating. An inability to replenish its capital buffers to a level that is commensurate with its risk profile could pressure DFCC’s National Long-Term Rating. Fitch sees limited upside for the bank’s ratings due to its weak franchise.