Fitch affirms Union Bank’s national rating

Fitch Ratings has affirmed Union Bank of Colombo Ltd’s (UB) National Long-term rating at ‘BB(lka)’, reflecting its improved asset quality, constrained profitability and lack of a broad deposit base.

The rating remains constrained by the requirement for meeting the minimum capital requirement (MCR) set by Central Bank of Sri Lanka (CBSL) by FYE09, its profitability, and challenges to the scalability of its operations. The outlook remains positive.

UB was restructured after posting negative equity in 2002, which involved the bank transferring Rs 600 million in cash and Rs 978m of NPLs to a special-purpose vehicle (SPV), in return for a 20-year deep-discounted bond (DDB) which is guaranteed by Sampath Bank PLC (SB, ‘AA-(lka)’(AA minus(lka)/Stable Outlook).