Fitch Ratings has upgraded the National Long-Term Ratings of three Sri Lankan finance companies owned by banks, following upgrades of their parent banks’ ratings.
People’s Leasing and Finance PLC (PLC) moved to ‘AA-(lka)’ from ‘A(lka)’, with a stable outlook. Merchant Bank of Sri Lanka and Finance PLC (MBSL) also rose to ‘AA-(lka)’ from ‘A(lka)’, and its outlook is stable. CBC Finance PLC (CBCF) was raised to ‘A+(lka)’ from ‘A(lka)’, also with a stable outlook.
Fitch said the upgrades follow the rating actions on the parent banks: People’s Bank (AA+(lka), stable), Bank of Ceylon (AA+(lka), stable) and Commercial Bank of Ceylon PLC (AA(lka), stable). The agency said the changes reflect its view of the parents’ improved ability to support their subsidiaries.
The ratings of the three companies are driven by Fitch’s expectation of extraordinary support from their parents, it said. People’s Bank owns 75% of PLC, Bank of Ceylon owns 84.4% of MBSL and Commercial Bank owns 100% of CBCF. Fitch also cited shared branding in some cases and management oversight, which it said raise the reputational risk to the parents if a subsidiary were to fail.
Fitch said the strength of each parent’s willingness to help differs. PLC has long been the leasing arm of the People’s Bank group, which Fitch said strengthens that bank’s propensity to provide support, although PLC’s balance sheet is large relative to its parent. MBSL plays a more limited role in the Bank of Ceylon group, and its record of high growth and variable profitability has put pressure on regulatory capital and leverage. Fitch said Bank of Ceylon has supported it before and it expects that to continue. CBCF has a modest group role and variable performance, though recent earnings and asset quality have improved.
Fitch said the outstanding and proposed rupee subordinated debt of the three companies is rated two notches below their National Long-Term Ratings. Any action on the companies’ ratings would lead to similar action on that debt.
Background
Fitch said the parent bank actions were taken after a sovereign upgrade, in a statement titled “Fitch Takes Action on 8 Sri Lankan Banks’ National Ratings on Updated Scale After Sovereign Upgrade”, dated 30 October 2026.
National scale ratings rank issuers within a single market to help local investors tell stronger borrowers from weaker ones. In Sri Lanka they carry the identifier ‘(lka)’, which Fitch said means they cannot be compared with its international ratings or with other countries’ national scales.
Fitch said a downgrade of a parent bank could lead to similar action on its subsidiary. It also listed weaker linkages with the parent, poor performance or a significant increase in the subsidiary’s balance sheet relative to the parent’s as factors that could trigger a downgrade. A stronger parent or a bigger role within the group could lead to a further upgrade.
What it means
Credit ratings are one of the tools investors and lenders use when deciding whether to buy a company’s debt or deposit money with it. Higher ratings can make it easier for a company to raise funds, though the effect on the cost of borrowing depends on market conditions and each lender’s decisions.
For readers who hold deposits, debentures or leases with these companies, Fitch’s action reflects the support it expects from the parent banks. It is an opinion on relative credit risk within Sri Lanka and not a guarantee of repayment.
