Fitch rates Bank of Ceylon’s Basel III subordinated debt final ‘A’

Monday, 5 May 2025 04:26 - - {{hitsCtrl.values.hits}}

Fitch Ratings has assigned Bank of Ceylon’s (BOC, CCC+/CCC+/AA-(lka)/Stable) proposed Sri Lankan rupee-denominated Basel III-compliant subordinated debentures of up to Rs. 15 billion a final National Long-Term Rating of ‘A(lka)’.

The final rating is the same as the expected rating assigned on 2 April, as it follows the receipt of documents conforming to information already received.

Fitch issued following key drivers for its rating decision:

The proposed debentures will mature in five years and be listed on the Colombo Stock Exchange. The bank plans to use the proceeds to strengthen its Tier 2 capital base and liquidity position, bridge maturity mismatches, and support the expansion of its asset base.

The proposed debentures will qualify as Basel III-compliant regulatory Tier 2 capital. The debentures include a non-viability clause whereby the notes will be converted to an Additional Tier 1 (AT1) instrument on a permanent basis, subject to the occurrence of a trigger event, as determined by the Governing Board of the Central Bank of Sri Lanka.

Fitch rates the proposed debentures two notches below the bank’s National Long-Term Rating anchor. This reflects Fitch’s baseline notching for loss severity for this type of debt, and our expectations of poor recoveries upon non-performance. There is no additional notching for non-performance risks, as the notes do not incorporate going-concern loss-absorption features and will only convert to AT1 at the point of non-viability.

BOC’s National Long-Term Rating is used as the anchor rating for this instrument because the rating reflects the bank’s standalone financial strength and best indicates the risk of the bank becoming non-viable.

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event including Valentine ’s Day. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Flower Bouquets, Clothing, Watches, Lingerie, Gift Sets and Jewellery. Also if you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.