Fitch Ratings Lanka has downgraded Siyapatha Finance PLC’s (SLFL) national long-term rating to ‘A-(lka)’ from ‘A(lka)’. The outlook is stable.
The agency has also downgraded the national long-term ratings on SLFL’s outstanding senior unsecured debentures to ‘A-(lka)’ from ‘A(lka)’ and outstanding subordinated debentures to ‘BBB+(lka)’ from ‘A-(lka)’.
The downgrade of SLFL’s rating follows the downgrade of its parent, Sampath Bank PLC’s national long-term rating to ‘A+(lka)’ from ‘AA-(lka)’ on July 8, 2015. It reflects Sampath Bank’s decreased ability to support SLFL. Fitch continues to believe that support for SLFL would be forthcoming from Sampath Bank, if needed.
SLFL is rated two notches below its parent, reflecting full ownership by Sampath Bank and the bank’s influence on SLFL’s strategic direction through representation on the finance company’s board. Funding from its parent accounted for 15 percent of SLFL’s total borrowings at end-March 2015. However, Fitch expects the share of deposits in SLFL’s funding profile to increase after the regulator gave approval for it to be a Licensed Finance Company (LFC) in 2013, which allows SLFL to collect deposits.
The two-notch differential also reflects SLFL’s limited role in the group with leasing accounting for just 4 percent of group advances at end-2014, of which SLFL provided 29 percent. Since its conversion to a LFC, SLFL ceased to share a common brand with its parent while branches situated within Sampath Bank’s premises have also decreased. SLFL’s contribution to group profit remains low, averaging 5 percent of group profit for 2012 to 2014. Fitch does not view a potential disposal of SLFL, which is not being planned, as being material to the group.
SLFL’s outstanding senior debentures are rated at the same level as SLFL’s national long-term rating, as they constitute direct, unconditional, unsecured and unsubordinated obligations of the company.
