Sampath Bank's subordinated debt rated 'A(lka)(EXP)'

Fitch Ratings has assigned Sampath Bank PLC's proposed Basel II-compliant subordinated debentures a National Long-Term Rating of 'A(lka) (EXP)'.

The issuance will total Rs 6 billion, with the debentures to mature in five years and carry fixed and floating coupons. The debentures will be listed on the Colombo Stock Exchange. Sampath Bank hopes to use the proceeds to support its Tier 2 capital base.

The final rating is subject to the receipt of final documentation conforming to information already received. The proposed subordinated debentures are rated one notch below Sampath Bank's National Long-Term Rating to reflect the subordination to senior unsecured creditors.

Sampath Bank's rating (A+(lka)/Stable) 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.