Tuesday, August 30, 2011

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.
source - www.dailynews.lk

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