Rating History
Dissemination Date Rating Outlook Action Rating Watch
06-Oct-26 AA Stable Upgrade -
29-Aug-24 AA- Stable Preliminary -
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.

Rating Rationale

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%).

Key Rating Drivers

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.

Issuer Profile
Profile
Bank of Ceylon (“BOC” or “the Bank”), a banking corporation established under the Bank of Ceylon Ordinance No 53 of 1938, commenced business on 1 August 1939 and is licensed under the Banking Act No. 30 of 1988, as amended. Its registered office is at BOC Square, Colombo 01. The Bank’s debentures are listed on the Colombo Stock Exchange. BOC was established in 1939 as Sri Lanka’s first state-owned commercial bank. It expanded rapidly across major regional cities from 1941. Its first overseas branch opened in London in 1949 and the second in Maldives in 1981. The Bank introduced Sri Lanka’s first credit card business with Visa in 1989 and joined SWIFT in 1994, strengthening international banking capabilities. Principal activities include personal, corporate, development and offshore banking, trade and lease financing, primary dealing, investment banking, treasury, remittances, Islamic banking, bancassurance, pawning, cards, foreign currency operations and related financial services.
Ownership
The Bank is 100% owned by the Government of Sri Lanka and falls directly under the Ministry of Finance. BOC is a Domestic Systemically Important Bank (D-SIB), reinforcing its strategic importance to the Government and supporting ownership stability. As a state-owned Bank under the Ministry of Finance, BOC benefits from policy-level industry oversight. The Board is appointed in accordance with the Bank of Ceylon Ordinance. The Government guarantees approved credit accommodations granted by the Bank under the Ordinance. The Government has historically infused capital and retains capacity to support the Bank if required.
Governance
The Board governs management and administration under the Ordinance. It consists of ten non-executive directors, including nine independent directors as per the CSE listing rules and five as per the Banking Act Direction No. 05 of 2024 on Corporate Governance for Licensed Banks. Mr. Kavinda M L De Zoysa serves as Chairman. The Chairman has over 30 years of banking experience across corporate banking, capital markets, risk, treasury, retail banking and governance. His experience includes senior leadership roles at Citibank and National Development Bank PLC and he has also served at Nations Trust Bank PLC and Seylan Bank PLC. The Board is supported by eight committees: Audit Committee (AC), Integrated Risk Management Committee (IRMC), Human Resources and Remuneration Committee (HRRC), Nomination and Governance Committee (NGC), Information and Communication Technology Committee (ICTC), Related Party Transactions Review Committee (RPTRC), Board Credit Committee (BCC) and Board Sustainability Committee (BSC). Darshana Gunasekera chairs the Audit Committee and brings extensive finance, risk and governance experience. The external auditor, the National Audit Office, issued an unqualified opinion on CY25 financial statements.
Management
The Board oversees the Bank through the GM/CEO and Deputy General Managers. Risk and compliance report to IRMC, while internal audit reports to AC. The management team is led by Y. A. Jayathilaka, confirmed as GM/CEO on 27 February 2026. He has over 29 years of banking experience in operational and strategic leadership. The Bank operates 32 executive committees with defined mandates to support day-to-day management and decision-making. BOC uses Signature 10.1 as its core banking system, integrated with systems for ATMs, cards, treasury, trade finance and digital banking. Key digital channels include online banking, mobile banking, digital passbook and online application platforms. The Bank follows a three-lines-of-defense risk framework. The Board sets risk appetite and oversees risk and internal controls, supported by IRMC and AC.
Business Risk
As at 1QCY26 (latest available sector data, CBSL), the banking sector asset base stood at LKR~25.8tn, expanding ~11.3% YoY (1QCY25: LKR~23.2tn). Gross loans and receivables grew strongly at ~24.4% to LKR~14.6tn, driven by broad-based private sector credit demand, while net investments contracted ~2.1% to LKR~9.4tn as the portfolio rebalanced toward lending. Deposits rose ~9.5% to LKR~20.5tn. Sector NII for 1QCY26 grew ~9.8% YoY to LKR~270.7bn, while PAT declined ~7.1% to LKR~85.1bn (1QCY25: LKR~91.6bn), reflecting higher impairment charges and operating cost growth accompanying rapid credit expansion. Asset quality continued to improve, with the sector Stage 3 ratio declining to 9.4% (1QCY25: 12.7%) supported in part by the credit-driven denominator effect, and Stage 3 impairment coverage strengthening to 59.5% (1QCY25: 54.1%). Capital and liquidity buffers moderated but remained above regulatory minimums, with total CAR at 18.3% (1QCY25: 19.4%). BOC is Sri Lanka's largest bank, with a bank-level asset base of LKR~5.4tn as at 6MCY26 (CY25: LKR~5.5tn), representing ~21.0% of banking sector assets as at the latest available sector reference date (1QCY26). It accounts for ~19.4% of sector gross loans and ~21.1% of sector deposits on the same basis; NII and PAT market shares are retained at CY25 levels pending full-year sector comparatives, at ~20.24% and ~20.61% respectively. Gross interest income for 6MCY26 rose ~3.6% to LKR~253.7bn (6MCY25: LKR~244.8bn), supported by loan growth. NII grew ~6.4% to LKR~109.4bn, with net fee and commission income rising ~17% to LKR~12.7bn, driving total operating income ~9.2% higher to LKR~131.4bn. PAT grew ~10.7% to LKR~39.8bn (6MCY25: LKR~35.9bn), with annualized ROA and ROE at 2.30% and 20.44% respectively. Gross loans and advances expanded to LKR~2.83tn (CY25: LKR~2.65tn), and the gross Stage 3 ratio improved to 12.11% (CY25: 12.34%), with Stage 3 provision coverage strengthening to 61.79% (CY25: 57.91%). Capital remained adequate with Tier 1 CAR at 13.32% and total CAR at 17.22%, both above the 10.00% and 15.00% regulatory minimums and above the additional 1% CBSL-directed buffer. BOC's strategy remains focused on digital transformation, financial inclusion, and lending growth, with BOC Flex and BOC Connect as key delivery channels. Execution quality, digital adoption rates, loan yield improvement, and the balance between commercial objectives and state mandates remain the key variables shaping the credit outlook.
Financial Risk
Asset quality continued to improve at 6MCY26, with the gross Stage 3 ratio declining to ~12.11% (CY25: ~12.34%; 6MCY25: ~13.40%), though it remains materially above the banking sector average of ~9.4% as at 1QCY26. Stage 3 provision coverage strengthened to ~61.79% (CY25: ~57.91%; 6MCY25: ~53.6%), reflecting enhanced provisioning buffers. The net Stage 3 ratio improved to ~5.01% (CY25: ~5.59%), indicating meaningful recovery activity alongside loan growth, though elevated NPLs persist in select lending segments. The impairment charge on loans and advances for 6MCY26 stood at LKR~14.6bn (6MCY25: LKR~12.0bn), reflecting continued prudence in credit cost recognition. The investment portfolio comprises G-Secs, equities, derivatives, and holdings in subsidiaries and associates. Derivative financial assets increased to LKR~9.3bn at 6MCY26 (CY25: LKR~6.9bn), reversing the prior-year decline, and warrant monitoring given broader market volatility. Deposits remained the primary funding source, accounting for ~86.3% of total liabilities at 6MCY26 (CY25: ~86.0%), with the marginal increase reflecting a faster contraction in total liabilities relative to deposits, amid a small reduction in securities sold under repurchase agreements to LKR~282.1bn (CY25: LKR~284.2bn), broadly stable. Within the deposit base, time deposits comprised ~67.9% (CY25: ~66.6%) and savings ~26.0% (CY25: ~26.2%), reflecting a broadly stable compositional mix. Top 20 depositor concentration stood at ~28.43% as of 3MCY26, the latest available disclosure. Total CAR improved to ~17.22% at 6MCY26 (CY25: ~16.89%; CY24: ~12.4%), comfortably above the 15.0% regulatory minimum and the additional 1% CBSL-directed buffer, though remaining below the banking sector average of ~18.3% as at 1QCY26. Tier 1 capital strengthened to ~13.32% (CY25: ~12.37%), above the 10.0% D-SIB minimum.
Instrument Rating Considerations
About the Instrument
BOC has issued Basel III-compliant, Tier 2, listed, rated, unsecured, subordinated, redeemable 5-year debentures with non-viability write-down features, raising LKR 15bn. The issue was oversubscribed and was listed on CSE on October 2, 2024, offering a fixed annual interest rate of 13.50% p.a. and a floating annual interest rate priced at 1.00% above the 12-month gross Treasury Bill rate, both payable annually. Initially, LKR~5bn was issued; however, upon oversubscription, two additional tranches of LKR~5bn each were utilized to increase the total to LKR~15bn. The primary objectives of this issuance are to enhance Tier 2 capital, manage and minimize the gap exposure in the Bank’s asset/liability portfolios, and strengthen the Bank’s liquidity position.
Relative Seniority/Subordination of Instrument
The claims of the debenture holders shall, in the event of the winding up of the Bank rank after all the claims of depositors and holders of senior debt and claims of secured and other unsecured creditors of the Bank and any preferential claims under any Statutes governing the Bank but shall rank in priority to and over the claims and rights of the Shareholder of the Bank.
Credit Enhancement
The issue is not underwritten. Repayment of the principal sum and interest on these debentures not being secured by any specific asset of Bank of Ceylon.
 
 

Oct-26

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(LKR mln)


Jun-26
3M
Dec-25
12M
Dec-24
12M
Dec-23
12M
A. BALANCE SHEET
1. Stage I | Advances - net 2,149,442 2,024,618 1,783,965 1,776,333
2. Stage II | Advances - net 238,999 198,896 220,884 309,345
3. Stage III | Advances (NPLs) 367,441 352,180 372,818 311,863
4. Stage III | Impairment Provision (227,045) (203,941) (199,959) (188,480)
5. Investments 2,268,588 2,667,576 2,378,870 1,770,573
6. Debt Instruments 2,344 3,012 1,791 2,132
7. Other Earning Assets 151,925 88,772 136,086 151,595
8. Non-Earning Assets 468,987 336,438 290,684 278,386
Total Assets 5,420,681 5,467,551 4,985,139 4,411,748
6. Deposits 4,319,238 4,388,586 4,208,603 3,882,232
7. Borrowings 417,539 458,788 230,430 182,568
8. Other Liabilities (Non-Interest Bearing) 270,910 254,376 243,546 95,234
Total Liabilities 5,007,687 5,101,751 4,682,579 4,160,034
Equity 412,994 365,800 302,560 251,715
B. INCOME STATEMENT
1. Mark Up Earned 253,685 496,159 461,114 524,798
2. Mark Up Expensed (144,332) (289,223) (293,561) (433,610)
3. Non Mark Up Income 22,019 39,864 14,489 9,169
Total Income 131,372 246,800 182,041 100,356
4. Non-Mark Up Expenses (37,961) (72,982) (67,085) (52,257)
5. Provisions/Write offs/Reversals (14,377) (21,110) 20,343 4,906
Pre-Tax Profit 79,034 152,708 135,300 53,006
6. Taxes (39,242) (76,701) (70,913) (26,312)
Profit After Tax 39,792 76,007 64,387 26,694
C. RATIO ANALYSIS
1. Revenues
Advances' Yield 10.0% 10.5% 11.1% 14.0%
Spread | Asset Yield - Cost of Funds 4.4% 4.2% 3.9% 2.5%
2. Performance
Cost of Funds [Mark Up Expensed / Average (Deposits + Borrowings)] 6.0% 6.2% 6.9% 10.8%
ROE 20.4% 22.7% 23.23% 10.55%
3. Capital Adequacy
Capital Adequacy Ratio 17.2% 16.9% 16.55% 15.84%
Net Stable Funding Ratio [Available Stable Funding / Required Stable Funding] 155.2% 156.6% 157.90% 145.00%
4. Funding & Liquidity
Liquid Assets / (Deposits + Borrowings Net of Repo) 50.2% 55.3% 54.43% 44.72%
Demand & Saving Deposit Coverage Ratio 172% 173% 206% 124%
Top 20 Deposits / Deposits 23.85% 27.34% 31.37% 27.08%
5. Credit Risk
Impaired Loan Ratio | [Stage III | Advances (NPLs) - net / Gross Advances] 5.0% 5.6% 7.2% 5.1%
Impaired Loan Ratio | [Stage III | Advances (NPLs) / Gross Advances] 13.4% 13.3% 15.3% 12.7%
Provision Coverage Ratio | [Impairment Provision / Stage III | Advances (NPLs)] 61.8% 57.9% 53.6% 60.4%

Oct-26

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Oct-26

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Rating Team Statements

  1. Credit Rating Agency means a body corporate engaged in the business of assessing and evaluating the credit- worthiness of any issuer or a specific issue of securities. https://www.sec.gov.lk/credit-rating-agency/

Conflict of Interest

    1. LRA will disclose to the Commission all other business activities it is engaged in at the time of applying for its licence and inform the Commission in writing prior to engaging in any other business activity after obtaining a licence from the Commission. (Section 34 – Rules applicable to Credit Rating Agencies)
    2. LRA will not engage in any other business which in the view of the Commission creates a conflict of interest unless prior written approval of the Commission is obtained. (Section 35 – Rules applicable to Credit Rating Agencies)
    3. In the conduct of any such other business activity, the LRA will ensure that proper processes are in place to have a clear demarcation of the different functions pertaining to such businesses. (Section 36 – Rules applicable to Credit Rating Agencies)

Restrictions

  1. (i) LRA will not be outsource any part of its work, which has a direct bearing on the function of rating. (Section 24 – Rules applicable to Credit Rating Agencies)
  2. (ii) LRA will enter into a written agreement with the party to whom any work is outsourced. Such agreement contains an undertaking from the party to whom any work is outsourced that they shall comply with the laws, rules, and directives that the LRA is bound to follow. (Section 25 – Rules applicable to Credit Rating Agencies)
  3. (4) The LRA will not appoint any individual as a member of the rating committee who:
    1. has a business development function of the Credit Rating Agency; or
    2. who initiates or participates in discussions regarding fees or payments with any Client of the LRA.
    (Section 28 – Rules applicable to Credit Rating Agencies)

Conduct of Business

  1. Prior to the commencement of a rating or during such process the LRA will not promise, assure or guarantee to a Client that a particular rating will be assigned. (Section 39 – Rules applicable to Credit Rating Agencies)
  2. LRA performs a rigorous and formal periodic review of all its methodologies. Such methodologies will be made available to the Commission for perusal, upon request. (Section 41 – Rules applicable to Credit Rating Agencies)

Independence & Conflict of interest

  1. LRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on LRA´s opinions or other analytical processes. In all instances, LRA is committed to preserving the objectivity, integrity, and independence of its ratings.
  2. LRA will not engage in any other business which in the view of the Commission creates a conflict of interest unless prior written approval of the Commission is obtained. (Section 35 – Rules applicable to Credit Rating Agencies)
  3. LRA will structure its rating teams and processes to promote continuity, consistency and avoid bias in the rating process. (Section 47 – Rules applicable to Credit Rating Agencies)

Monitoring and review

  1. For purposes of transparency the LRA will publish sufficient information about an entity/security rated, frequency of default and whether a rating grade assigned has changed over time. The definitions and computation methods for the default rates stated in the default studies shall also be disclosed. (Section 44 – Rules applicable to Credit Rating Agencies)
  2. LRA maintain the following records pertaining to Clients:
    1. all internal records to support its credit rating opinions;
    2. all particulars relating to Clients at its office which shall include the name and registered address and contact numbers of such Client, names and addresses of their directors as at the date of rating, its issued share capital and the nature of business;
    3. a written record of all complaints received from Clients and action taken thereon by the LRA. (Section 48 – Rules applicable to Credit Rating Agencies)
  3. LRA maintains confidentiality of all non-public information entrusted to it by Clients at all times including such Client’s identity and transactions carried out for such Client unless and to the extent such disclosure is required by law, or unless authorised by the Client to disclose such information. (Section 50 – Rules applicable to Credit Rating Agencies)
  4. LRA does not destroy, conceal or alter any records, property or books relating to the business of the Credit Rating Agency which are in its possession or under its control with the intention of defeating, preventing, delaying or obstructing the carrying out of any examination (Section 53 – Rules applicable to Credit Rating Agencies)

Probability of Default

  1. LRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability).

Proprietary Information

  1. All information contained herein is considered proprietary by LRA. Hence, none of the information in this document can be copied or, otherwise reproduced, stored or disseminated in whole or in part in any form or by any means whatsoever by any person without LRA’s prior written consent.

Oct-26

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Nature of Instrument Size of Issue (LKR) Tenor Security Quantum of Security Trustee Book Value of Security Assets (LKR mln)
Subordinated 15,000,000,000 5 years Unsecure N/A Hatton National Bank N/A
table 2
Name of Issuer Bank of Ceylon
Issue Date 2-Oct-24
Maturity 1-Oct-29
Coupon Basis Annual

Redemption Schedule

Sr. Due Date Principal & Markup Opening Principal Markup Rate Coupon Principal Payment Total Installment Principal Outstanding
LKR LKR
Issuance
1 2-Oct-25 15,000,000,000 13.50% 2,025,000,000 2,025,000,000 15,000,000,000
2-Oct-26 15,000,000,000 13.50% 2,025,000,000 - 2,025,000,000 15,000,000,000
2-Oct-27 15,000,000,000 13.50% 2,025,000,000 - 2,025,000,000 15,000,000,000
2-Oct-28 15,000,000,000 13.50% 2,025,000,000 - 2,025,000,000 15,000,000,000
2-Oct-29 15,000,000,000 13.50% 2,025,000,000 15,000,000,000 17,025,000,000 -
10,125,000,000 15,000,000,000 25,125,000,000

Oct-26

lra.com.lk