LANKA RATING ASSIGNS


Preliminary Debt Instrument Rating of

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Bank of Ceylon - LKR 30 Bn Basel III compliant Tier 2 Debentures

06-Oct-26

01

Applicable Criteria

Methodology | Debt Instrument Rating | Aug-24

Methodology | Financial Institution Rating | Aug-24

02

Related Research

Sector Study | Commercial Bank | Feb-26


03

Analyst

Richmond Reginald | richmond@lra.com.lk
+94 114 500099 | www.lra.com.lk

PRESS
RELEASE

DISCLAIMER

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to LRA

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Rating Type Debt Instrument
Current
(06-Oct-26)
Action Preliminary
Rating AA
Outlook Stable
Rating Watch -


The assigned rating reflects Bank of Ceylon's ("BOC" or "the Bank") preeminent position as the largest Commercial Bank in Sri Lanka (in terms of deposit base), underpinned by sovereign ownership, systemic importance and very strong franchise value. BOC is a designated Domestic Systemically Important Bank (DSIB) and is 100% owned by the Government of Sri Lanka (GoSL). These fundamental strengths highlight the Bank's importance in the Sri Lankan financial system and very high likelihood of support, if needed. The Bank demonstrated strong growth in its deposit base, which remains granular, and advances during CY26. This has strengthened the Bank's capacity to absorb the potential credit impact of SOE-related obligations, if these materialized. BOC's Gross NPLs stood at ~12.11% as at 6MCY26 (6MCY25: ~13.40%), higher than the industry average of ~9.30%. BOC enjoys strong capitalization with reported Capital Adequacy Ratio of ~17.22% as of 6MCY26, remaining above the regulatory requirement of 15%, although marginally below its peers (~18.50%). BOC maintains significant investments in Government Securities (LKR ~2.6tn as of CY25, LKR ~2.3tn as of CY24), comprising 98% of total investments, strengthening the liquidity position of the Bank. During CY25, the Bank reported a healthy increase of ~18% YoY in its PAT to record at LKR ~76.0bn (CY24: LKR ~64.4bn). This trend continued in 3MCY26 as Net Interest Income (NII) increased to LKR ~53.0bn, on account of loan portfolio growth, translating into strong profitability. The Bank continues to manage its foreign currency exposure by limiting its open position and strengthening its liquidity profile, reflected in a Liquidity Coverage Ratio (LCR) of 283.00% in 6MCY26 (CY25: LCR ~296.00%).

The rating is dependent on the Bank’s ability to uphold its asset quality, capital position, and performance indicators in the near term. The Bank’s 100% ownership by the Government of Sri Lanka (GoSL) and the expectation of timely support remain key considerations in the rating assessment.
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About the Entity

Bank of Ceylon is a State-owned commercial Bank in Sri Lanka, established under the Bank of Ceylon Ordinance No. 53 of 1938. The Chairman of the Board is Mr. Kavinda M L De Zoysa and the management team is led by Mr. Y.A. Jayathilaka, the General Manager/Chief Executive Officer.


About the Instrument

BOC intends to issue Basel III Compliant Tier II Listed, Rated, Unsecured, Subordinated, Redeemable 5-year and 7-year Debentures. The issue is at a sum of LKR 10bn with an option to increase up to LKR 20bn at the discretion of the Bank in the event of an oversubscription of the initial issue and with a further option to increase up to LKR 30bn in the event of an oversubscription of the initial issue and the second tranche. The Bank intends to utilize the entire proceeds of the issue to expand its loan book in the ordinary course of business within next Twelve (12) months. Since BOC has multiple sources of funds, such as different types of deposits and borrowings, dependency on proceeds of the Bond issue is marginal in expanding Bank’s loan book. The Claims of the Debenture Holders shall in the event of winding up of BOC, rank after the claims of preferential claims under any statutes governing BOC, depositors, holders of senior debt and claims of secured and other unsecured creditors of BOC but in priority to and over the claims and rights of the shareholders of BOC. These Debentures will rank in pari passu with other subordinated creditors subject to the non-occurrence of a trigger event.

Lanka Rating Agency Limited

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