Fitch affirms Sanasa Bank at 'BB+(lka)'

Fitch Ratings Lanka has affirmed Sanasa Development Bank's (SDB) National Long-Term rating at 'BB+(lka)'. The outlook is stable.

SDB's rating reflects its modest asset quality and a comfortable equity buffer against future loan losses. The rating also factors in SDB's exposure to the micro-finance (MFI) niche and the competitive pressures from larger banks moving into this niche.

With an asset base of Rs 19 billion, SDB is a small licensed specialized bank (LSB). In addition, SDB is not part of the payments and settlements system and is of low systemic importance in Fitch's opinion. As such, state support cannot be relied upon.

The rating could be upgraded if sustained improvement in SDB's financial profile and asset quality occurs while accompanied by high internal capital generation.

The rating would be downgraded if lending practices significantly deviate from SDB's core expertise in MFI lending, or if high dividend payouts seriously weaken the bank's equity and assets ratio.

SDB's capital adequacy ratio (CAR) remained strong after a series of capital augmentation programmes from 2006 to 2010. The bank plans to list by introduction, as mandated by the regulator, in late 2011 or early 2012.

This will increase SDB's access to capital markets.