Fitch: National Development Bank view to negative

Fitch Ratings said it revised the outlook on National Development Bank plc's national long-term rating to negative from stable and affirmed the national long-term rating at A+(lka).

The agency also said it assigned a national long-term rating of A(lka) on the bank's proposed Basel III-compliant subordinated unsecured debentures.

The proposed debentures will total up to 6.5 billion in Sri Lankan rupee with maturities of five years and will be listed on the Colombo Stock Exchange, Fitch said.

They will qualify as Basel III-compliant regulatory tier 2 capital for the bank and include a non-viability clause whereby they will convert to ordinary shares if so determined by regulators, the agency explained.

The proceeds will be used to strengthen the bank's tier 2 capital base and support loan-book expansion, Fitch said.

The ratings reflect the bank's developing franchise and satisfactory asset quality relative to peers, balanced against declining capitalization and above-sector loan growth, the agency said.

The negative outlook considers an expectation of continued pressure on the bank's capitalization, stemming from its rising risk appetite, Fitch said.

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