Fitch rates NTB’s Proposed Sub Debt ‘A-(lka)’
Fitch Ratings Lanka has assigned Nations Trust Bank PLC’s (NTB)
proposed subordinated debentures of up to Rs 2 billion a National
Long-Term rating of ‘A-(lka)’. The issue is rated one notch below NTB’s
National Long-Term rating. The proposed debentures have a maturity of
five years with principal repayment as a bullet payment, and have both
fixed and floating coupons to be paid semi-annually.
Following a private placement, they are to be listed on the Colombo
Stock Exchange by way of an introduction. The issuance is to be used to
access alternative funding sources other than deposits, reduce maturity
mismatches between assets and liabilities, and strengthen NTB’s Tier II
capital base. NTB’s ratings take into account its evolving franchise
within most business segments, healthy profitability, and its improved
capital position. Fitch also notes that the bank’s loan book contains a
high proportion of consumer products and leases.
The ratings could be upgraded if there is continued consolidation of
NTB’s lending and deposit franchise as well as of its risk management
processes and controls, together with a sustained healthy capital
structure. Conversely, a rating downgrade could result from an
unexpected weakening of NTB’s asset quality or earnings, although this
is less likely over the medium-term. NTB accounted for 2% of total
licensed commercial bank assets in Sri Lanka at FYE10 (financial year
ended 31 December 2010). The John Keells group and the Central Finance
group hold 29.9% and 20% of NTB’s equity, respectively.
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