Fitch Rates DFCC Bank's Subordinate Debentures 'A+(lka)( EXP)'
The proposed debentures, which will have tenors of five and seven years and carry fixed coupons, will be listed on the Colombo Stock Exchange. DFCC expects to use the proceeds to strengthen its Tier II capital base and manage maturity mismatches.
The final rating is subject to the receipt of final documentation conforming to information already received.
KEY RATING DRIVERS
The proposed subordinated debentures are rated one notch below DFCC's National Long-Term Rating to reflect the subordination to senior unsecured debt.
DFCC's rating captures its developing commercial banking franchise and still-high capitalisation. Its weaker asset-quality compared with better-rated peers weighs on its rating. The Negative Outlook on DFCC's National Long-Term Rating reflects weakening capital buffers that stem from weaker asset-quality metrics, increased loan growth and below-average internal capital generation.
The ratings on the proposed debentures will move in tandem with DFCC's National Long-Term Rating.
A sustained weak operating environment, indicated by a sovereign downgrade, would result in a downgrade. Conversely, a revision of the sovereign Rating Outlook to Stable could result in a similar action for Nossa.
A downgrade could also result from a failure by Nossa to successfully implement its growth strategy, indicated by a sustained inflation-adjusted decline in gross premiums or a significant decline in profitability.