Fitch Ratings has affirmed Commercial Bank of Ceylon PLC's (COMB) National Long-Term Rating of 'AA-(lka)'.
The Outlook is Stable. At the same time, Fitch has affirmed the bank's Sri Lankan rupee subordinated debt at 'A(lka)'.
Key Rating Drivers
Intrinsic Profile Drives Rating: COMB's National Long-Term Rating is driven by its intrinsic credit strength, which is highly influenced by exposure to the sovereign's weak credit profile (Long-Term Foreign- and Local-Currency Issuer Default Rating: CCC+). The rating also reflects the bank's well-established domestic franchise as Sri Lanka's third-largest commercial bank.
Sovereign Profile Shapes OE: The sovereign's weak credit profile continues to drive our assessment of Sri Lankan banks' operating environment (OE) score of 'ccc+'. This reflects the sector's large exposure to the domestic economy and sizeable exposure to the sovereign through government securities and lending to the broader public sector, which makes banks vulnerable to the state's financial health. Fitch expects the OE to remain broadly supportive, but external headwinds may exert pressure on the domestic OE and thereby, sector performance.
Pawning and Overseas Lending Expand: COMB's loan book remained weighted towards corporates in 2025. However, strong pawning growth in 1Q26 raised the retail share. Like peers, the bank's offshore lending excluding its Bangladesh operations expanded rapidly, more than doubling in 2025 to form over 6% of total loans by end-1Q26 (2025: 5.5%; 2024: 3.2%). This accounted for around one-third of incremental lending in the quarter.
We expect these trends to persist over the rest of 2026 as the bank deploys excess foreign-currency liquidity, while elevated gold prices support pawning demand.
Growth-Driven Risk Appetite: Like private bank peers, COMB's large risk appetite stems from aggressive loan expansion and exposure to the weak sovereign via local- and foreign-currency government securities, which formed 22% (2024: 28%) and 3% (2024: 2.6%), respectively, of total group assets at end-2025.
Loan growth picked up to 37% loan in 2025 (2024: 18%), the fastest among similarly rated peers, driven by term loans to corporates and backed by pent-up demand. We expect this pace to ease in the near to medium term, with growth slowing to 3% in 1Q26, below the peer average.
Risks to Loan Quality: Fitch expects COMB's impaired (stage 3) loan ratio to continue to improve over the next 12-18 months due to strong loan growth despite a potential rise in credit impairments. The ratio improved to just under 6% in 1Q26 from 6.4% in 2025 (2024: 8.6%), as stage 3 loan stock slightly decreased, but we believe loan quality pressures are likely to emerge, mostly from the expanding domestic loan book as it seasons, while the bank's over exposure to overseas borrowers with higher credit risks could pose additional downside risks.
Profitability to Moderate: COMB's operating profit/risk-weighted assets (OP/RWA) ratio rebounded to 5.9% in 1Q26 after declining to 5.1% in 2025 (2024: 7.0%), owing to the moderation in credit costs relative to 2025. We believe that this profitability improvement is temporary as we expect margin compression from rising interest rates and continued growth in risk-weighted assets to outweigh the benefit of lower impairment charges, which will reduce COMB's profitability over the next 12-18 months.
Capital Buffers to Narrow: The bank's common equity Tier-1 (CET1) ratio improved to 13.1% in 1Q26 from 12.8% at end-2025 (2024: 14.0%), supported by continued profitability, despite dividend distribution and moderate loan growth. While higher regulatory risk-weights on gold-backed lending are likely to have a modest impact on capital metrics, we expect the CET1 ratio to moderate gradually but remain above 12% over the medium term, as balance-sheet expansion continues.
LDR Nearing Pre-Crisis Levels: We expect the bank's loans to deposits ratio (LDR), which was at 75% at end-1Q26 (2025: 77%, 2024: 66%), to increase in the near to medium term as it continues to expand its loan book and approach pre-crisis levels. Above-average loan growth funded mainly by its excess liquidity resulted in a sharp increase in the LDR in 2025. Nevertheless, the bank's access to foreign-currency term funding is showing early signs of improvement, complementing its mostly deposit-funded growth strategy.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
COMB's National Rating is sensitive to a change in the bank's creditworthiness relative to other Sri Lankan issuers. A downgrade of the National Rating is most likely to stem from a deterioration in Sri Lanka's sovereign rating through its influence on the banks' OE.
A deterioration in key credit metrics beyond our base-case expectations relative to peers would also lead to increased downward pressure on the National Rating, which is driven by its intrinsic financial strength, independent of any sovereign rating changes.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
COMB's National Rating is sensitive to a change in creditworthiness relative to other Sri Lankan issuers. Upside to COMB's National Rating is limited in the near term due to our assessment of the sovereign rating and the OE. That said, an improvement in Sri Lanka's sovereign rating may lead to an upgrade of the bank's National Rating.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
COMB's outstanding Sri Lankan rupee-denominated subordinated debt is rated two notches below its 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.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
The subordinated debt rating will move in tandem with the bank's National Long-Term Rating.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
RATING ACTIONS
Entity / Debt
Rating Type
Rating
Rating Action
Prior
Commercial Bank of Ceylon PLC
Natl LT
AA-(lka)
Affirmed
AA-(lka)
subordinated
Natl LT
A(lka)
Affirmed
A(lka)
Page
of 1
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
APPLICABLE CRITERIA
National Scale Rating Criteria (pub. 22 Dec 2020)
Bank Rating Criteria (pub. 09 May 2026) (including rating assumption sensitivity)
ADDITIONAL DISCLOSURES
Solicitation Status
Endorsement Policy
Potential Conflicts Resulting from Revenue Concentrations
ENDORSEMENT STATUS
Commercial Bank of Ceylon PLC -
DISCLAIMER & DISCLOSURES
All Fitch Ratings (Fitch) credit ratings are subject to certain limitations and disclaimers. Please read these limitations and disclaimers by following this link: https://www.fitchratings.com/understandingcreditratings. In addition, the following https://www.fitchratings.com/rating-definitions-document details Fitch's rating definitions for each rating s
Read More
Solicitation Status
The ratings above were solicited and assigned or maintained by Fitch at the request of the rated entity/issuer or a related third party. Any exceptions follow below.
Fitch's solicitation status policy can be found at www.fitchratings.com/ethics.
Endorsement Policy
Fitch's international credit ratings produced outside the EU or the UK, as the case may be, are endorsed for use by regulated entities within the EU or the UK, respectively, for regulatory purposes, pursuant to the terms of the EU Regulation or the UK Regulation, as the case may be. Fitch's approach to endorsement in the EU and the UK can be found on Fitch's Regulatory Affairs page on Fitch's website. The endorsement status of international credit ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for structured finance transactions on the Fitch website. These disclosures are updated on a daily basis.
(C) 2026 Electronic News Publishing, source ENP Newswire