Fitch affirms Seylan Bank at A-(lka); Outlook stable | Daily News

Fitch affirms Seylan Bank at A-(lka); Outlook stable

Fitch Ratings has affirmed the National Long-Term Rating on Seylan Bank PLC at ‘A-(lka)’. The Outlook is Stable.

Seylan’s National Long-Term Rating captures the bank’s weak capital buffers and deteriorating asset quality, which reflect the bank’s high-risk appetite. The bank has significant exposure to the retail and SME segments, which are highly susceptible to economic cycles. Fitch expects Seylan to be designated a domestic systemically important bank (D-SIB) once its assets reach Rs 500 billion (end-June 2019: Rs 485 billion). This will subject Seylan to higher regulatory capital requirements of 10% for Tier 1 capital ratio and 14% for total capital ratio, including a 1.5 pp capital surcharge for D-SIBs. To meet these requirements, the bank may need to undertake a capital raising as its internal capital generation is modest and its growth aspirations are strong.

The bank has announced it plans to raise Rs 4.3 billion of common equity, which is equivalent to 1.2% of the bank’s risk-weighted assets at end-June 2019.

“We believe Seylan remains prone to asset-quality risk in light of its high ratio of restructured loans, loan concentration and strong risk appetite,” Fitch said.

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