Fitch rates Nations Trust Bank’s Subordinated Debt Final ‘A(lka)’

Fitch Ratings has assigned Nations Trust Bank PLC’s (NTB: A(lka)/Stable) issue of subordinated debentures of up to Rs. 5 b a final National Long-Term rating of ‘A-(lka)’.  

The final rating is the same as the expected rating assigned on 15 September 2016, and follows the receipt of documents conforming to information already received.  

The debentures will mature in five years and carry fixed and floating coupons. The debentures are to be listed on the Colombo Stock Exchange. NTB plans to use the proceeds to support its Tier 2 capital base, diversify its funding mix and reduce structural maturity mismatches.  

Key rating drivers

The subordinated debentures are rated one notch below NTB’s National Long-Term Rating to reflect the subordination to senior unsecured debt.  

NTB’s ratings reflect its moderate franchise, high product concentration and declining capitalisation. The Outlook is Stable. 

Rating sensitivities 

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

An upgrade of NTB’s rating is contingent upon the bank lowering product concentration, significantly improved capitalisation and enhanced funding stability, alongside progress in building a strong commercial banking franchise. Weaker capitalisation or an increased risk appetite, which may be evident in aggressive loan growth and weaker asset quality, could result in a downgrade.