Fitch Ratings \u2013 Singapore\/Colombo \u2013 04 Nov 2026: Fitch Ratings has upgraded the National Long-Term Ratings of three Sri Lankan bank-supported non-bank financial institutions (NBFIs) following the upgrade of their parent banks\u2019 ratings.<\/p>\n
\u2014 People\u2019s Leasing and Finance PLC (PLC) has been upgraded to \u2018AA-(lka)\u2019 from \u2018A(lka)\u2019; Outlook Stable<\/p>\n
\u2014 Merchant Bank of Sri Lanka & Finance PLC (MBSL) has been upgraded to \u2018AA-(lka)\u2019 from \u2018A(lka); Outlook Stable<\/p>\n
\u2014 CBC Finance PLC (CBCF) has been upgraded to \u2018A+(lka)\u2019 from \u2018A(lka)\u2019; Outlook Stable<\/p>\n
The upgrades follow the rating upgrades of the parent banks of PLC, MBSL and CBCF: People\u2019s Bank (Sri Lanka) (PB, AA+(lka)\/Stable), Bank of Ceylon (BOC, B-\/AA+(lka)\/Stable) and Commercial Bank of Ceylon PLC (COMB, AA(lka)\/Stable), respectively, and reflect our view of the parents\u2019 improved ability to support their subsidiaries. Please see \u201cFitch Takes Action on 8 Sri Lankan Banks\u2019 National Ratings on Updated Scale After Sovereign Upgrade\u201d, dated 30 October 2026, on the parent bank ratings.<\/p>\n
National scale ratings are a risk ranking of issuers in a particular market designed to help local investors differentiate risk. Sri Lanka\u2019s national scale ratings are denoted by the unique identifier \u2018(lka)\u2019. Fitch adds this identifier to reflect the unique nature of the Sri Lankan national scale. National scales are not comparable with Fitch\u2019s international rating scales or with other countries\u2019 national rating scales.<\/p>\n
Key Rating Drivers
\nThe National Long-Term Ratings of PLC, MBSL and CBCF are driven by Fitch\u2019s expectation of extraordinary support from their parent banks, based on an assessment of their parent banks\u2019 credit profiles as well as their ability and propensity to support the NBFI subsidiaries.<\/p>\n
We believe the parent banks would provide extraordinary support to their subsidiaries, if needed, given their high ownership stakes (PB owns 75% of PLC, BOC owns 84.4% of MBSL and COMB owns 100% of CBCF), shared branding in certain cases and management oversight. These factors increase the reputational risk to the parents if the subsidiaries were to fail.<\/p>\n
Our expectation of shareholder support for PLC takes into consideration its longstanding and largely successful role as the PB group\u2019s leasing arm, which strengthens PB\u2019s propensity to provide support, if required. This is balanced against PLC\u2019s significant balance-sheet size relative to that of its parent.<\/p>\n
MBSL plays a more limited role in the BOC group. Its record of high growth and variable profitability has put pressure on regulatory capitalization and leverage, which may weigh on the parent\u2019s propensity to support the subsidiary. Nonetheless, BOC has provided shareholder support when needed in the past, and we expect this support to remain available to meet the subsidiary\u2019s growth and regulatory capital needs over the near to medium term.<\/p>\n
CBCF\u2019s modest group role and variable performance potentially limits the strength of the parent\u2019s propensity to support the subsidiary, although recent earnings and asset quality performance have improved<\/p>\n
RATING SENSITIVITIES
\nFactors that Could, Individually or Collectively, Lead to Negative Rating Action\/Downgrade
\nThe support-driven ratings are sensitive to changes in the parents\u2019 credit profiles as well as Fitch\u2019s opinion around the parents\u2019 ability and propensity to extend timely extraordinary support. Any negative action on the parents\u2019 National Ratings could result in similar action on the NBFI subsidiaries\u2019 ratings.<\/p>\n
Sustained poor performance or weakened linkages with the parent could reduce the parent\u2019s motivation to support the NBFI subsidiary, putting pressure on the support-driven ratings. A significant increase in the subsidiary\u2019s balance sheet relative to that of its parent could also constrain the parent\u2019s capacity to provide extraordinary support, and may result in a rating downgrade.<\/p>\n
Factors that Could, Individually or Collectively, Lead to Positive Rating Action\/Upgrade
\nPositive action on the support-driven ratings may be driven by an improvement in their parent banks\u2019 credit profiles or an increase in the subsidiaries\u2019 role and contribution within their parent groups.<\/p>\n
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
\nThe outstanding and proposed Sri Lankan rupee-denominated subordinated debt instruments of PLC, MBSL and CBCF are rated two notches below the entities\u2019 National Long-Term Ratings. We have applied our Bank Rating Criteria to these instruments because we consider the prudential capital framework for Sri Lankan finance companies to be closer to that of banks.<\/p>\n
The ratings reflect our baseline notching for loss-severity for this debt class due to our expectations of poor recoveries in the event of default. There is no additional notching for non-performance risk as the debentures have no going-concern loss-absorption features, in line with Fitch criteria.<\/p>\n
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
\nAny action on the entities\u2019 National Long-Term Ratings will result in similar action on their outstanding and proposed subordinated debt instrument ratings.<\/p>\n
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
\nThe principal sources of information used in the analysis are described in the Applicable Criteria.<\/p>\n
Public Ratings with Credit Linkage to other ratings
\nThe ratings of PLC, MBSL and CBCF are linked to the National Long-Term Ratings of their parent banks, PB, BOC, and COMB, respectively.<\/p>","protected":false},"excerpt":{"rendered":"
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