Fitch assigns 'AA(lka)' rating to DFCC Bank's senior debt

Fitch Ratings Lanka this week assigned a National rating of 'AA(lka)' to DFCC Bank's (DFCC) 2007/2012 unsecured senior redeemable debentures of up to Rs 2 billion. The agency has also affirmed the bank's National Long-term rating at 'AA(lka)' and the 'AA-(lka)' National Long-term rating assigned to DFCC's subordinated debentures, Fitch said in a press release.

Fitch said it believes that DFCC's long and good performance record has enabled it to source long-term concessionary funding from international agencies. Such funding is either channeled through or guaranteed by the Sri Lankan government and constituted 28% of funding at Q307. The bank has instituted some initiatives to diversify funding away from traditional long-term concessionary sources.

It said DFCC's gross NPLs ratio increased to 6.4% at Q307 from 5.1% at FYE06. Follow up on regular collections and NPLs recovery tends to be slow during the year but improves towards the end of the financial year when such indicators are monitored in line with individual performance evaluation targets.

However, the bank's NPL classification is more stringent than that of other banks as classification takes place at two months, compared to the three month NPL classification stipulated by the Central Bank of Sri Lanka, the rating agency said.

"DFCC remains strongly capitalised despite a decrease in capital ratios due to loan growth. Equity to assets was 19.9% at Q307 against 21.3% at FYE06.

Core and total capital adequacy ratios were 17.3% and 14.6%, respectively at Q307 compared to 22.8% and 15.8%, respectively at FYE06," the agency said.