ECONOMYNEXT – Fitch Ratings has assigned Sampath Bank’s proposed Sri Lankan rupee-denominated Basel III-compliant subordinated debentures of 10 billion rupees a final national long-term rating of ‘A(lka)’.
“Fitch rates the proposed debentures two notches below the bank’s National Long-Term Rating anchor,” the rating agency said. “This reflects Fitch’s baseline notching for loss severity for this type of debt and our expectations of poor recoveries.
“There is no additional notching for non-performance risk, as the proposed debentures do not incorporate going-concern loss-absorption features.”
The proposed debentures will mature in five years and will be listed on the Colombo Stock Exchange.
The bank plans to use the proceeds to strengthen its Tier 2 capital base.
The full statement is reproduced below:
Fitch Assigns Sampath Bank’s Basel III Subordinated Debt Final ‘A(lka)’
Fitch Ratings – Colombo – 04 Mar 2025: Fitch Ratings has assigned Sampath Bank PLC’s (AA-(lka)/Stable) proposed Sri Lankan rupee-denominated Basel III-compliant subordinated debentures of LKR10 billion a final National Long-Term Rating of ‘A(lka)’.
The final rating is the same as the expected rating revised on 21 January 2025 as it follows the receipt of documents conforming to information already received.
Key Rating Drivers
The proposed debentures will mature in five years and will be listed on the Colombo Stock Exchange. The bank plans to use the proceeds to strengthen its Tier 2 capital base.
The proposed debentures qualify as Basel III-compliant regulatory Tier 2 capital and include a non-viability clause whereby they will convert to ordinary voting shares, subject to the occurrence of a trigger event, as determined by the regulator.
Fitch rates the proposed debentures two notches below the bank’s National Long-Term Rating anchor.
This reflects Fitch’s baseline notching for loss severity for this type of debt and our expectations of poor recoveries.
There is no additional notching for non-performance risk, as the proposed debentures do not incorporate going-concern loss-absorption features.
Sampath’s National Long-Term Rating is used as the anchor rating for this instrument because the rating reflects the bank’s standalone financial strength and best indicates the risk of the bank becoming non-viable.
For details of the key rating drivers and rating sensitivities of Sampath’s National Long-Term Rating, see Fitch Upgrades 10 Sri Lankan Banks’ National Ratings and Affirms Five after Scale Recalibration, published on 21 January 2025.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
A downgrade of the bank’s National Long-Term Rating would lead to a downgrade of the subordinated debt rating.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
An upgrade of the bank’s National Long-Term Rating would lead to an upgrade of the subordinated debt rating.
(Colombo/Mar5/2025)
