Lankapage Logo CP 19 YEARS
Go Home Home Serving the Sri Lankan community globally since 2000
go to LankaPage.com

Leading News from Sri Lanka::

* Fitch Rates Sri Lanka's Sampath Bank's Basel III Sub Debt Final 'A(lka)'
Mon, Mar 5, 2018, 08:42 am SL Time, ColomboPage News Desk, Sri Lanka.

Mar 05, Colombo: Fitch Ratings-Colombo-02 March 2018: Fitch Ratings has assigned Sampath Bank PLC's (A+(lka)/Negative) proposed Basel III compliant subordinated debentures a National Long-Term Rating of 'A(lka) '.

The notes will total Rs. 7.5 billion, mature in five years and carry fixed coupons. The notes include a non-viability clause and will qualify as regulatory Tier II capital for the bank. The bank plans to use the proceeds to strengthen its Tier II capital base and support its loan book expansion. The debentures are to be listed on the Colombo Stock Exchange.

The final rating is the same as the expected rating assigned on 11 January 2018, and follows the receipt of documents conforming to information already received.

Fitch rates the proposed Tier II instrument one notch below the bank's National Long-Term Rating of 'A+(lka)' to reflect the notes' subordinated status and higher loss-severity risks relative to senior unsecured instruments. The notes would convert to equity upon the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka.

Sampath's National Long-Term Rating is used as the anchor rating because the rating reflects the bank's standalone financial strength. Fitch believes that the bank's standalone credit profile best indicates the risk of becoming non-viable.

Fitch has not applied additional notching to the notes for non-performance risk, as they have no going-concern loss-absorption features, in line with Fitch's criteria.

Sampath's National Long-Term Rating was affirmed on 21 December 2017, factoring in Fitch's expectation that the bank is in the process of shoring up capitalization to meet the tighter requirements of 10.0% Tier 1 and 14.0% total capital ratios by 1 January 2019. The bank's regulatory Tier 1 and total capital ratios were 10.3% and 14.4%, respectively, at end-2017.

In December 2017, Sampath raised Rs. 7.6 billion and Rs. 6 billion via a rights issue and Basel III compliant subordinated debenture issuance, respectively. In addition to the proposed subordinated debenture issuance of up to Rs. 7.5 billion, the bank has announced a further Rs. 12.5 billion rights issue for 2018 as part of its medium-term capital plan.

However, the Negative Outlook reflects Fitch's view that Sampath could find it challenging to improve its capitalization if it fails to successfully execute its medium-term capital plan while maintaining high loan growth of over 20.0%, which Fitch expects for 2018 to 2020.

Sampath's gross loan growth of 18.2% in 9M17 continues to outpace the industry's 11.9% growth (Sampath 2016: 22.1%, industry 2016: 17.5%) and Fitch expects this trend to continue alongside the bank's pursuit of market share.

The rating of the notes would move in tandem with Sampath's National Long-Term Rating.

Fitch would downgrade Sampath's rating if the bank is unable to maintain capital buffers commensurate with its risk profile and operating environment-related risks over the medium term. Fitch would revise the Outlook to Stable if the bank successfully implements its capital-enhancement plan to improve its capital profile.

 

ColomboPage - Recent 10 Stories ::
Suranga Lakmal to Captain Sri Lanka in the 3rd Test match against West Indies
PAYable takes home highest number of awards at SLASSCOM Innovation Summit
Senior immigration officer arrested smuggling gold fined Rs. 3 mn
Three suspects in Matara jewellery store heist remanded, main suspect killed
Sri Lanka to introduce an e-Health card for all
4th International Day of Yoga celebrated in Sri Lanka
Sri Lanka Army urges public not to be misled by rumors on 'army withdrawals' from North and East
Senior immigration officer arrested with Rs. 36 million worth gold
Over 1000 applications per month for dual citizenship
Main suspect in Matara Jewellery robbery killed in retaliatory attack

Copyright © 2000, 2016 by LankaPage.com (LLC) :
The news and other contents on ColomboPage are copyrighted property of LankaPage.com, LLC. Any unauthorized use of any information on ColomboPage may constitute a violation of copyright laws. You need written permission to reproduce, republish, post, transmit, broadcast or distribute, material from this site from LankaPage.com, LLC. However, news organizations or broadcasters in Sri Lanka may republish the news items in ColomboPage with proper acknowledgment to ColomboPage.