Fitch rates Seylan Bank debenture BBB+(lka)

Fitch Ratings Lanka said it assigned a BBB+(lka) national rating to the 1 billion Sri Lankan rupee unsecured subordinated redeemable debentures due 2011 to be issued by Seylan Bank Ltd. and affirmed the bank's A-(lka) national long-term rating and the BBB+(lka) national rating assigned to its existing subordinated debentures.

The outlook is stable.

The agency said the ratings reflect Seylan's market position as the fifth-largest licensed commercial bank in Sri Lanka, its consequent systemic importance and its established customer franchise.

However, the rating also factors in the bank's weak asset quality, relatively weak capital position and resulting poor solvency, Fitch added. Seylan's non-performing loan ratio continued to be comparatively higher than that of its peers at 13.1% at the end of 2005 despite a decline in this ratio from 15.9% at the end of 2004. The agency said significant improvements to risk management and more stringent credit appraisal are essential for the bank to improve and avoid further deterioration of its asset quality, particularly in light of high loan growth of 27% during 2005.

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