Fitch affirms A-(lka) for Seylan Bank
Fitch Ratings Lanka has affirmed Seylan Bank PLC's (Seylan) National
Long-Term rating at 'A-(lka)'. The Outlook is Stable, a media release
from the Bank said.
Seylan's rating reflects Fitch's expectations of support from the
State of Sri Lanka if required, given the bank's systemic importance.
However, the state's ability to support is limited by the government's
limited financial ability as evident in its 'BB-'/Stable' rating.
Seylan is one of six systemically important domestic banks as
identified by the Sri Lankan regulator. Tangible state support was
demonstrated since Seylan's crisis in December 2008, including
contributing to two equity injections between 2009 and 2011.
During this period Rs. 7.7 billion of equity was injected by the
state and private investors.
At end-June 2012 the state effectively controlled 32 percent of
Seylan's voting equity.
Seylan's asset quality has improved significantly since its takeover
by a new management in 2009.
The value of non-performing advances (NPA) has reduced by 44 percent
between end-June 2009 and end-June 2012, due to the bank's focused
recovery efforts. Together with modest loan growth, Seylan's NPA ratio
improved to 12.34 percent at end-June 2012 from 29.38 percent at
end-2009.
Seylan's profitability continues to improve, with return on assets
(ROA) increasing to an annualised 1.2 percent at end-June 2012
(end-2011: 0.62 percent, which included a one-off provision for
voluntary retirement of Rs. 698 million).
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