Fitch Ratings Lanka has affirmed Seylan Bank s National Long-Term Rating at 'A-(lka)'. The Outlook is Stable. Fitch has also affirmed Seylan's senior unsecured debentures at 'A-(lka)' and subordinated debt at 'BBB+(lka).

Seylan's rating is driven by Fitch's view that the Sri Lankan state (BB-/Stable) would provide extraordinary support to the bank, in case of need, because of its systemic importance. The Sri Lankan regulator has identified Seylan as one of six systemically important domestic banks. However, the state's ability to support the bank, if needed, is limited as reflected in the sovereign's 'BB-' rating.

Seylan's recovery efforts have resulted in a significant improvement in its reported gross non-performing loan (NPL) ratio to 10.9% at end-1H14 from the peak of 29.7% at end-2009. However, the amount of Seylan's NPLs continues to be high compared with higher-rated peers. This is mostly due to large legacy NPLs on which recoveries have been challenging. Seylan's ratio of unprovided NPLs to equity remains weaker than higher-rated peers.