International ratings agency Fitch has affirmed Commercial Bank of Ceylon PLC's national long-term rating at AA-(lka) with a stable outlook, citing the bank's strong domestic position despite vulnerabilities tied to Sri Lanka's weak sovereign credit profile.
Fitch Ratings has confirmed Commercial Bank of Ceylon PLC's National Long-Term Rating at AA-(lka), keeping the outlook stable while also affirming the bank's Sri Lankan rupee subordinated debt at A(lka). The affirmation reflects the bank's intrinsic credit strength and established position as the country's third-largest commercial bank, though Fitch notes that the rating remains heavily influenced by Sri Lanka's weak sovereign creditworthiness.
The rating agency identifies significant structural challenges facing the bank. Sri Lanka's sovereign credit profile constrains the broader operating environment for all domestic banks, with sector vulnerabilities stemming from substantial exposure to government securities and public sector lending. Fitch expects this environment to remain broadly stable, though external pressures could impact domestic performance. The bank's loan portfolio has undergone notable shifts, with rapid expansion in overseas lending—which more than doubled in 2025 to exceed 6% of total loans—and strong growth in pawning activities driven by elevated gold prices.
The bank's aggressive expansion strategy has produced mixed results. Loan growth accelerated to 37% in 2025, the fastest among similarly rated peers, though growth moderated to 3% in the first quarter of 2026. While the impaired loan ratio improved to just under 6% in early 2026 from 6.4% the previous year, Fitch anticipates emerging credit pressures as the expanding domestic loan portfolio seasons. The agency also flagged potential risks from overseas borrower exposure. Profitability metrics showed temporary improvement in the first quarter, but Fitch expects margin compression and rising risk-weighted assets to moderate returns over the next 12 to 18 months.
Capital adequacy remains a concern as the bank continues rapid balance-sheet expansion. The common equity Tier-1 ratio improved slightly to 13.1% in early 2026 but is expected to moderate gradually, remaining above 12% under the agency's base-case scenario. The loans-to-deposits ratio, currently at 75%, is approaching pre-crisis levels as the bank deploys excess liquidity for lending. Fitch indicated that any downgrade would likely result from deterioration in Sri Lanka's sovereign rating, while near-term upgrade prospects remain limited due to the sovereign constraints.
