Sepcialised microfinancier Sanasa Development Bank PLC (SDB) is expected to raise about Rs.1.5 to Rs.2 billion through a rights issue in 1Q-2Q16, a rating report said.
The bank raised Rs.1 billion through a rights issue in 2014 which supported its capital profile.
A rating report by ICRA Lanka, a wholly owned subsidiary of ICRA Ltd, a group company of Moody’s said the bank is expected to require about Rs.2 to 3 billion over the next four year to maintain core capital over 10 percent level. The rating agency assigned (SL) BBB- with a positive outlook to SDB.
ICRA Lanka said the rating factors in SDB’s established position, especially in the rural and the semi urban segments, on the back of the SANASA movement and the currently comfortable capitalisation profile.
The positive outlook takes note of the improvement in the asset quality (GNPAs at 3.2 percent in June 2015 vis-a-vis 3.8 percent in December 2014 and 5.1 percent in December 2013) and the profitability indicators (RoA1 at 1.8 percent for 6M2015 vis-a-vis 1.4 percent for 2014 and 0.9 percent for 2013) over the recent past.
The rating however takes cognizance of SDB’s exposure to customer segments with modest credit profile, limited revenue (non-interest income at 0.7 percent of the average total assets for the year ended December 2014) and funding (deposits accounted for 87 percent of the total borrowings as in March 2015) diversification, subdued liquidity profile characterised by high asset-liability mismatches and the steep portfolio growth witnessed during 2014 and H12015.
“The bank has implemented an integrated risk management system in 2013 and, is currently implementing a loan origination system to improve the overall credit risk assessment,” the rating report said.
ICRA Lanka however noted that there was scope for improvement in the internal controls, monitoring and information systems of the bank due to the risks inherent with the key target segments of the bank such as micro, small and medium enterprises (MSMEs) in the rural/semi urban segments. SDB’s gross lending portfolio grew at a robust pace of about 45 percent in 2014 and at about 55 percent (annualized) in six months ended June 2015.
Courtesy: Daily Mirror 2 September