June 25, Colombo: Fitch Ratings has assigned Commercial Bank of Ceylon PLC’s (CB, AA-(lka)/Stable) proposed Sri Lankan rupee-denominated Basel III-compliant subordinated debentures of up to LKR10 billion an expected National Long-Term Rating of ‘A(EXP)(lka)’.

The debentures, which have maturities of five and seven years, will be listed on the Colombo Stock Exchange. The bank plans to use the proceeds to further strengthen its Tier 2 capital base, raise long-term funding and bridge maturity mismatches.

The bank expects the debentures to qualify as Basel III-compliant regulatory Tier 2 capital. The notes include a non-viability clause whereby they will convert to ordinary voting shares subject to the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka.

The final rating is subject to the receipt of final documentation conforming to information already received.

KEY RATING DRIVERS

Fitch rates the proposed Basel III Tier 2 notes two notches below the bank’s National Long-Term Rating of ‘AA-(lka)’. This reflects Fitch’s baseline notching for loss severity for this type of debt, and our expectations of poor recoveries. There is no additional notching for non-performance risks, as the notes do not incorporate going-concern loss-absorption features.

CB’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.

CB’s National Long-Term Rating was revised on 25 January 2021 and is highly influenced by our assessment of the operating environment for banks in Sri Lanka. It also reflects its established domestic franchise as Sri Lanka’s third-largest bank, which will support its earnings performance and its entrenched domestic-deposit franchise that underpins its funding and liquidity profile.

Full Report

ColomboPage - Recent 10 Stories :: Ministerial Consultative Committee on Justice agrees to present the Code of Criminal Procedure (Amendment) Bill in Parliament -- [11 minutes ago] Risks for Sri Lankan Banks may rise on end of restriction on ISB investments - Fitch Ratings -- [22 minutes ago] Fitch rates Commercial Bank of Ceylon’s Basel III Subordinated Debt ‘A(EXP)(lka)’ -- [28 minutes ago] Basil Rajapaksa to be sworn in as a MP in parliament - report -- [35 minutes ago] ‘Daraz Cares Igenumata Athwelak’ facilitating education for the students of Sri Lanka US welcomes release of LTTE prisoners, but not the pardon of Duminda Silva Coronavirus update: 1,941 new COVID-19 cases identified Thursday, total rises to 248,050 Will reunite Ranil and Sajith - Navin Joint Sri Lanka, U.S. & Japan naval exercise CARAT – 21 commences at Trincomalee Sri Lanka Foreign Minister addresses the Asia-Pacific High Level Conference on Belt and Road Cooperation