Fitch Ratings has assigned Sampath Bank PLC’s (A+(lka)/Stable) Basel II-compliant subordinated debentures of up to Rs. 7 billion a final National Long-Term Rating of ‘A(lka)’.
The final rating is the same as the expected rating assigned on 9 October and follows the receipt of documents conforming to information already received.
The debentures will mature in five years and carry fixed and floating coupons. Sampath Bank plans to use the proceeds to strengthen its Tier 2 capital base and match the duration of the assets and liabilities in its long-term lending portfolio. The debentures are to be listed on the Colombo Stock Exchange.
Key rating drivers
The issue is rated one notch below Sampath Bank’s National Long-Term Rating to reflect the subordination to senior unsecured creditors.
Sampath Bank’s rating reflects its lower capitalisation relative to that of its peers and relatively higher risk appetite, which offset benefits from the growth of its franchise. The Outlook is Stable.
The rating on the proposed debentures will move in tandem with Sampath Bank’s National Long-Term Ratings.
Fitch views the upside potential of Sampath Bank’s ratings as limited as long as the trend of higher risk-taking and declining capitalisation persists. A sharp decline in its asset quality could result in a rating downgrade.