Financial Times

Fitch affirms AA(sri) rating of NDB
Fitch Ratings Lanka (FRL) has affirmed its AA(sri) rating for the long term unsecured senior debt of National Development Bank Ltd. Following its merger with its subsidiary, NDB Bank.

Consequently, the AA-(sri) national rating assigned for the implied long term unsecured senior debt of NDB Bank and the A+(sri) rating assigned to the 2001/2006 subordinated debentures of NDB Bank have been withdrawn, as the assets and liabilities of NDB Bank have been transferred to NDB Ltd.

FRL said in a statement that it believes the merger would now allow NDB to transform itself from a development financial institution to a universal bank.
“NDB Ltd would be able to leverage on its existing synergies to cross sell products and optimize the utilisation of capital,” it said.

Historically, NDB has been highly capitalised with a total capital ratio of over 20 percent. However, with the recent acquisitions of Eagle Insurance and NDB Bank in 2004, the ratio had fallen to 15.39 percent as at 30 June 2005 as these investments are deducted in arriving at the regulatory capital.

The capital ratio for the merged bank is expected to be in the region of 15-16 percent, compared to the minimum regulatory requirement of 10 percent. “At present the capital ratio remains comfortable in light of the strong asset quality and would be sufficient to support asset growth in the medium term,” FRL said.

“Beyond that, NDB Ltd may need to raise additional capital depending on loan growth and earnings retention.”

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