Sampath Bank drops Moody’s

  • Cites lack of need to tap international markets

By Dayan Surendranathan

Sampath Bank decided to discontinue the credit rating services they obtained from Moody’s as they do not foresee themselves going to international markets to raise capital in the near future as they are well capitalised at present, according to the bank.

A senior official of Sampath Bank PLC told The Morning yesterday (22) that the financial cost of Moody’s services was also a factor in the decision.

“When the Central Bank of Sri Lanka announced their decision to increase minimum capital requirements for licensed commercial banks in 2017, we made plans to go out into the international markets to raise this capital via dollar debentures. Due to various reasons, the most salient being market conditions, we gave up on this idea. We managed to raise this capital locally and are currently well capitalised. Keeping Moody’s on is a costly affair as well. We do not foresee having to raise capital on international markets anytime in the near future, so this was the sole reason we decided to drop the agency.”

When asked about whether recent statements from the Government of Sri Lanka had influenced this decision, Sampath Bank PLC vehemently denied the claim, affirming that the decision was independent of those developments.
Sampath Bank released the decision in a corporate disclosure on 17 December; that they decided to discontinue the credit rating services they received from Moody’s. 

On 18 December, Hatton National Bank PLC (HNB) followed suit and made the decision to drop Moody’s as well. In the official disclosure, HNB cited a similar reason to that of Sampath Bank, writing that “the ratings issued under the said agreement have not been used in support of any debt instruments to date”.

On 29 September, Moody’s downgraded the long-term foreign currency deposit ratings of Sampath Bank PLC and HNB to “Caa1” from “B3”, and the banks’ long-term local currency deposit rating to “Caa1” from “B2”. It also lowered the Baseline Credit Assessment (BCA) of the two banks to “Caa1” from “B2”. 

Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva took to Twitter and stated that Sampath Bank and Hatton National Bank, in which the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF) hold 11.3% and 25% shares, respectively, discontinued services of rating agencies. He claimed that the decision of the two banks was a result of the statement made by State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal the previous week. 

“So Sampath Bank PLC (11.3% held by EPF/ETF; second largest) and Hatton National Bank (25% SLIC/EPF largest shareholder) have discontinued services of rating agency Moody’s after major attack launched on them by Minister Ajith Nivard Cabraal after their Caa1 downgrade of #SriLanka.”

Earlier this month (12), MP Cabraal slammed international credit rating agencies in a media release, stating: “It is very likely that investors who have placed trust in Sri Lanka’s potential will not be distracted by ill-advised and subjective comments made by hostile external spectators, politically motivated elements, and biased agencies that are operating under an ‘independent’ label.”