Fitch assigns Sampath Bank’s Basel III subordinated debt final ‘A(lka)’

Fitch Ratings has assigned Sampath Bank PLC’s (AA-(lka)/Stable) proposed Sri Lankan rupee-denominated Basel III-compliant subordinated debentures of Rs.10 billion a final National Long-Term Rating of ‘A(lka)’.

The final rating is the same as the expected rating revised on January 21, 2025, as it follows the receipt of documents conforming to information already received.

The proposed debentures will mature in five years and will be listed on the Colombo Stock Exchange. The bank plans to use the proceeds to strengthen its Tier 2 capital base.

The proposed debentures qualify as Basel III-compliant regulatory Tier 2 capital and include a non-viability clause, whereby they will convert to ordinary voting shares, subject to the occurrence of a trigger event, as determined by the regulator.

Fitch has rated the proposed debentures two notches below the bank’s National Long-Term Rating anchor, which reflects the rating agency’s baseline notching for loss severity for this type of debt and its expectations of poor recoveries. 

“There is no additional notching fornon-performance risk, as the proposed debentures do not incorporate going-concern loss-absorption features,” Fitch said in a rating commentary.

Sampath’s National Long-Term Rating is used as the anchor rating for this instrument because the rating reflects the bank’s standalone financial strength and best indicates the risk of the bank becoming non-viable.