"As a listed bank, HNB has to get a rating for its debentures according to the requirement of the Securities and Exchange Commission," Udul Chandrasena from HNB's corporate finance department told LBO.
"The 'A- (sri)' rating denotes a low expectation of credit risk," Fitch said.
"The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings."
The debentures were issued in six classes:
|
Maturity |
Coupon |
Amount (LKR million) |
Type A |
2012 |
Bi-annual, Floating |
262.5 |
Type B |
2013 |
Bi-annual, Floating |
250.0 |
Type C |
2014 |
Bi-annual, Floating |
300.0 |
Type D |
2016 |
Zero Coupon |
100.0 |
Type E |
2021 |
Zero Coupon |
107.5 |
Type F |
2024 |
Zero Coupon |
200.0 |
Total |
1,220.0 |
"This will allow the bank to extend the maturity of its liabilities," Fitch Analyst Gerard Wickrema said.
HNB is the second largest private commercial bank in Sri Lanka, with assets of Rs174 billion as at December 2005.
"HNB's financial profile has improved over the last few years supported by two equity infusions (LKR 2.4bn) in 2004 and 2005," Fitch said.
"The equity infusions represented a 31% increase over HNB's end Sept. '04 equity and will support growth and improve loss absorption capacity."
Fitch added that HNB's profitability has improved, though it still lags behind its major peers, largely due to higher overheads.
But the bank was addressing the cost problem, and risk management.
Fitch said the bank has made progress in bad loans allowing it to reduce them by 14 percent over the last two years.
-Asantha Sirimanne: asantha@vanguardlk.com