Lanka Rating Agency upgrades First Capital Treasuries to ’A+’

First Capital Treasuries PLC and Lanka Rating Agency Ltd., (LRA) have jointly announced the upgrade of First Capital Treasuries PLC’s credit rating to ‘A+’ from ‘A’, reflecting the company’s strengthened financial position, robust risk management practices, and continued excellence in Sri Lanka’s capital markets.

The rating upgrade comes after a comprehensive assessment of First Capital Treasuries’ financial performance, market positioning, and strategic direction, highlighting the company’s resilience amid challenging economic conditions.

First Capital Treasuries PLC has established itself as a cornerstone institution in Sri Lanka’s financial landscape over the past two decades. As a primary dealer authorised by the Central Bank of Sri Lanka, the company has played a pivotal role in Government Securities trading, fostering liquidity in the secondary market, and facilitating efficient price discovery mechanisms that have significantly deepened the country’s capital markets.

The company’s innovative approach to financial solutions has enabled both institutional and retail investors to access government securities with ease, contributing to broader financial inclusion and market development. First Capital Treasuries has consistently demonstrated exceptional trading capabilities, maintaining a substantial market share in government securities while adhering to the highest standards of compliance and transparency.

The ‘A+’ rating represents a significant milestone, indicating First Capital Treasuries’ very strong capacity to meet its financial commitments. This upgrade is particularly noteworthy as it comes during a period of economic adjustment for Sri Lanka.

Lanka Rating Agency Ltd., which is duly regulated by Securities and Exchange Commission of Sri Lanka applies rigorous analytical frameworks in its rating process, examining multiple factors including capital adequacy, asset quality, liquidity profiles, risk management frameworks, and corporate governance practices. The agency’s methodology incorporates both quantitative metrics and qualitative assessments to arrive at ratings that accurately reflect an institution’s creditworthiness.

“This rating upgrade validates our strategic focus on sustainable growth and prudent risk management,” said First Capital Holdings PLC Managing Director/CEO Dilshan Wirasekara. “Despite market volatilities, we have maintained our commitment to excellence in serving our clients while strengthening our financial fundamentals. The A+ rating will further enhance stakeholder confidence in our operations and support our ongoing mission to deliver exceptional value to all our stakeholders while contributing to the development of Sri Lanka’s capital markets.”

Lanka Rating Agency Ltd., Chief Executive Officer Dr. Kenneth De Zilwa emphasised the significance of the upgrade: “First Capital Treasuries has demonstrated remarkable financial discipline and strategic foresight in navigating complex market conditions. Our rating committee was particularly impressed by the company’s robust capital position, sophisticated risk management framework, and consistent performance metrics. The upgrade to A+ reflects our confidence in the company’s ability to maintain its strong market position while managing potential risks effectively.”

Lanka Rating Agency Ltd., continues to play a crucial role in strengthening Sri Lanka’s financial ecosystem by providing independent, objective assessments of credit risk across various sectors. Through its rigorous rating methodologies and transparent analytical processes, LRA contributes significantly to building the national balance sheet by enhancing market confidence, improving pricing efficiency, and facilitating better-informed investment decisions.

The agency’s work enables investors to differentiate between varying levels of credit risk, thereby promoting efficient capital allocation across the economy. By maintaining the highest standards of integrity and analytical rigor, Lanka Rating Agency Ltd helps establish benchmarks for financial stability and performance that ultimately strengthen Sri Lanka’s overall economic resilience.

This latest rating action underscores the shared commitment of both organisations to supporting the development of robust capital markets in Sri Lanka and contributing to the nation’s economic growth and stability.

The company enjoyed an exceptional year in terms of profitability in FY24 on the back of substantial trading gains on Government Bonds due to a sharp decline in interest rates. The Company’s Profit After Tax (PAT) in FY24 stood at Rs. ~11.1 billion, compared to Rs. ~2.9 billion in FY23. The performance trends normalised but remained strong (after the one-off gains in FY24) as FCT posted PAT of Rs. ~2.5 billion in 9MFY25. The company’s direct income was Rs. ~8.6 billion in 9MFY25 while direct expense (interest costs) stood at Rs. ~4.8 billion in 9MFY25 showing a decline of ~17.8% from Rs. ~5.8 billion in 9MFY24. FCT recorded a healthy Capital Adequacy Ratio (CAR) of ~17.95% in 9MFY25. This is well above the statutory requirement of 10%.