Fitch rates Sampath Bank’s subordinated debt A(lka)(EXP)

Fitch Ratings has assigned Sampath Bank PLC's (A+(lka)/Stable) proposed Basel II-compliant subordinated debentures an expected National Long-Term Rating of 'A(lka) (EXP)'. The issuance is to total LKR6bn, with the debentures to mature in five years and carry fixed and floating coupons. The debentures are to be listed on the Colombo Stock Exchange. Sampath Bank plans 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. KEY RATING DRIVERS 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 reflects its lower capitalization relative to that of its peers and relatively higher risk appetite, which offset benefits from the growth of its franchise. The Outlook is Stable. RATING SENSITIVITIES 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 capitalization persists. A sharp decline in its asset quality could result in a rating downgrade.