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Fitch Ratings has assigned Hatton National Bank PLC’s (HNB; AA-(lka)/Stable) proposed senior unsecured and subordinated debentures expected National Long-Term Ratings of ‘AA-(lka)(EXP)’ and ‘A+(lka)(EXP) respectively.
The issuance is to total Rs. 10 b, with the debentures to mature in five years and carry fixed coupons. The debentures are to be listed on the Colombo Stock Exchange. HNB expects to use the proceeds to reduce asset and liability maturity mismatches while improving its Tier II capital base.
The final rating is subject to the receipt of final documentation conforming to information already received.
Key rating drivers
The proposed senior debentures are rated at the same level as HNB’s National Long-Term Rating in accordance with Fitch’s criteria as they constitute unsecured and unsubordinated obligations of the bank. The proposed subordinated debentures are rated one notch below its National Long-Term Rating to reflect the subordination to its senior unsecured obligations.
HNB’s rating reflects its strong franchise, satisfactory capitalisation, established track record and higher risk appetite compared to better-rated peers.
Rating sensitivities
The ratings on the proposed debentures will move in tandem with HNB’s National Long-Term Rating.
Upside potential for HNB’s ratings stems from a lower risk appetite and sustained improvements in its financial profile, in particular asset quality and funding. A material increase in risk taking, unless sufficiently mitigated through capital and financial performance, could result in a rating downgrade.
A full list of HNB’s ratings follows:
