Fitch rates Commercial Bank’s Sub Debt ‘AA-’

Fitch Ratings Lanka has assigned Commercial Bank of Ceylon PLC’s (CB) proposed subordinated debentures of up to LKR1bn a National Long-Term rating of ‘AA-(lka)’. A full rating breakdown is provided at the end of this commentary.

The proposed debentures are rated one notch below CB’s National Long-Term rating to reflect their debt-like features.

The debentures will have a maturity of five years with principal repayment as a bullet payment on maturity. Coupon payments will be annual at fixed rates, and do not contain any deferral clauses. The debentures are to be listed on the Colombo Stock Exchange alongside CB’s other listed and rated debentures. The issuance is aimed at strengthening CB’s Tier 2 capital base.  CB’s ratings reflect its solid domestic franchise, sound profitability and its strong capital position. A reversal of asset quality trends or deterioration in capitalisation may exert pressure on CB’s ratings.

Established in 1969 but tracing its origins to 1920, CB is the largest private bank and third-largest licensed commercial bank in Sri Lanka, accounting for 10% of banking sector assets at end-2010.