Thursday, 27 November 2014 00:00
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Fitch Ratings Lanka has assigned Sampath Bank PLC’s (Sampath; AA-(lka)/Stable) proposed subordinated debentures of up to Rs. 7 b a final National Long-Term Rating of ‘A+(lka)’.
The assignment of the final rating follows the receipt of final documents that conform to information previously received. The final rating is at the same level as the expected rating assigned on 11 November.
The debentures, which will have a tenor of five years and carry a fixed coupon, will be listed on the Colombo Stock Exchange. Sampath expects to use the proceeds to strengthen its Tier 2 capital base and reduce asset and liability maturity mismatches.
Key rating drivers
The proposed debentures are rated one notch below Sampath’s National Long-Term Rating to reflect their subordination to senior unsecured debt.
Sampath Bank’s rating is driven by its modest and expanding franchise, and relatively higher risk appetite as seen in its aggressive loan growth and high gold-backed lending until end-2013, which has put pressure on its asset quality.
Fitch believes asset quality indicators could be weaker than those reported should a broader definition of impairment be applied. This could put pressure on its rating given the bank’s lower capitalisation relative to peers.
Rating sensitivities
The rating on the debentures will move in tandem with Sampath’s National Long-Term Ratings.
A full list of Sampath’s ratings follows:
National Long-Term Rating: ‘AA-(lka)’; Stable Outlook
Outstanding Sri Lanka rupee-denominated subordinated debentures: ‘A+(lka)’
Proposed Sri Lanka rupee-denominated subordinated debentures: ‘A+(lka)’
