RAM upgrades Sanasa Development Bank’s outlook to ‘Positive’
View(s):Sri Lanka’s main co-op lender Sanasa Development Bank (SDB) has had its long-term ratings outlook upgraded to “Positive”, from “Stable”, by ratings agency RAM. This is an outcome of its above average asset quality and improved capitalisation, stemming from consistent capital infusions, and inspite of the bank catering to relatively risky target clientele and having a below average liquidity position.
Further, RAM also renewed the bank’s long- and short-term financial institution ratings of “BBB” and “P3″, respectively. And also indicated that SDB’s asset quality was ‘above average’ as a result of “its good collections on the back of its group lending system and proximity to its clients through the co-operative network which has enabled the bank to maintain a better gross non-performing loans (‘NPLs’) ratio than its [peers]“.
However, RAM also cautioned that these ratings were “moderated by the bank’s small stature, its relatively risky target clientele and below average liquidity position”. SDB only controls 3.16% of all assets in the licenced specialised bank (LSB) segment, and focuses on providing rural micro-financing.
At the same time, RAM also stated that SDB’s deposit base expanded 20.75% year-on-year, while also commenting that the bank’s loan growth was an “aggressive 31.99% year-on-year” which it concluded was “in line with industry growth”. It also opined that the bank’s “focus on a relatively risky customer segment has enabled it to charge higher interest rates on its loans”, while also adding that “we derive comfort from the availability of Rs. 1 billion of contingency funding lines”.
(JH)
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