Fitch positive on Sampath Bankís ĎAA-(lka)í
Fitch Ratings Lanka has affirmed Sampath Bank PLCís (SB) National
Long-Term rating at ĎAA-(lka)í.
The outlook remains positive.
The affirmation reflects SBís 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 bankís 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 SBís 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 bankís current growth momentum
results in a further dilution of its core capitalisation to levels more
in line with lower-rated peersí.
SBís tier 1 capital adequacy ratio (CAR) was strong at 10.5% at
end-June 2011. However, its total CAR at 12.3% was marginally lower than
rated-peers and has been decreasing due to rapid loan growth over
While SBís high profitability supports incremental capital
generation, its capital base may require further strengthening to enable
it to maintain present capitalisation levels if the current growth
momentum is sustained. SBís unprovided NPLs at 5.4% of equity at H111,
although higher than the 3.0% at end-2010, are significantly lower than
historical levels (end-2009: 26%).