Fitch revises Siyapatha’s Outlook to Stable; affirms ‘A-(lka)’

Fitch Ratings Lanka has revised the Outlook on Siyapatha Finance PLC (Siyapatha) to Stable from Negative and affirmed its National Long-Term Rating at ‘A-(lka)’.  

The agency has also affirmed the National Long-Term Rating on Siyapatha’s senior unsecured debentures at ‘A-(lka)’ and subordinated debentures at ‘BBB+(lka)’.  

Key rating drivers

National ratings  

The rating action follows the revision of the Outlook on its parent Sampath Bank PLC’s ‘A+(lka)’ rating to Stable from Negative on 13 June.  

Siyapatha’s rating reflects Fitch’s expectation that support for Siyapatha would be forthcoming from Sampath, which owns 100% of Siyapatha and is involved in the strategic direction of the subsidiary through board representation.   

Siyapatha is rated two notches below its parent because of its limited role to the group’s core business and it is branded independently from its parent. Sampath’s leasing book accounted for just 7% of group loans at end-March 2018, of which half came from Siyapatha. Siyapatha is a small contributor to group profit, accounting for 5% of group 2017 pre-tax profit.  

Debt ratings  

Siyapatha’s senior unsecured debentures are rated at the same level as Siyapatha’s National Long-Term Rating, as they constitute direct, unconditional, unsecured and unsubordinated obligations of the company.

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

Rating sensitivities

National ratings

Siyapatha’s rating could change if Sampath Bank’s rating changes or if Siyapatha’s strategic importance to the bank changes.

Narrower notching could result from higher importance to the group through greater synergies, shared branding and closer operational integration while remaining majority-owned by Sampath Bank.

Debt ratings  

The senior and subordinated debt ratings will move in tandem with Siyapatha’s National Long-Term Rating.