Fitch Ratings has assigned Pan Asia Banking Corporation PLC's (PABC, BBB-(lka)/Stable) outstanding Sri Lanka rupee-denominated Basel IIcompliant subordinated debentures a National Long-Term Rating at 'BB+(lka)'.
PABC's National Long-Term Rating of 'BBB-(lka)' reflects declining capitalisation following its rapid growth in the past.
The bank raised Rs.2.1 billion in March 2017 via a rights issue to increase its minimum regulatory capital in order to meet the Rs.7.5 billion target which was due on 1 January 2017.
The rating on the outstanding debentures will move in tandem with PABC's National Long-Term Rating.
An upgrade of PABC's rating is contingent upon the bank achieving a sustained and significant improvement in capitalisation, alongside a moderation in risk appetite.
PABC's rating would be downgraded if loss-absorption buffers deteriorate further, either through aggressive loan-book growth or a greater share of un-provided NPLs. Fitch Ratings said.
The Pan Asia Banking Corporation PLC is required to increase minimum regulatory capital further to Rs.10 billion by 1 January 2018. Fitch believes that the bank's earnings retention alone is not likely to be sufficient to achieve the capital standards, despite improved profitability, Fitch Ratings, a credit ratings agency revealed.