Sampath outlook positive - Fitch
Fitch Ratings Lanka has affirmed Sampath Bank PLC’s (SB) National
Long-Term rating at ‘AA-(lka)’. The outlook remains positive.
The affirmation reflects SB’s strong asset quality and profitability,
its comfortable equity buffer maintained against future loan losses, as
well as its rapid growth from 2010.
The retention of the positive outlook is driven by continuous
improvements in the bank’s credit metrics supported by ongoing
structural changes since 2009 (in terms of tighter credit controls,
improved recovery focus and better risk management), as well as its
growing franchise and market share in terms of bank sector deposits,
loans and assets.
An upgrade of SB’s rating would depend on its ability to meet or
surpass its core capitalization levels relative to local and regional
peers over the medium-term, particularly in view of its continued high
loan growth, while maintaining strong asset quality and robust core
returns on assets (ROA, excluding non-recurring items).
Conversely, the outlook may be revised to stable if the bank’s
current growth momentum results in a further dilution of its core
capitalization to levels more in line with lower-rated peers.
Gross non-performing loans (NPLs) fell by 33% yoy in 2010 and by a
further 3% in H111, due to enhanced recovery initiatives, tighter
underwriting standards than previous years (including credit
centralisation), and structural improvements in the macroeconomy.
Gross NPL ratio of 3.2% at end-H111 (FYE10: 4%) is considerably
better than peers’, also supported by its large pawning (gold-backed
loans) portfolio (end-H111: 22% of advances) with near zero NPLs. |