: Fitch Ratings has assigned Commercial Bank of Ceylon PLC's (COMB, A(lka)/Stable) proposed Sri Lankan rupee-denominated Basel III-compliant subordinated debentures of up to LKR12 billion a final National Long-Term Rating of 'BBB+(lka)'.

The final rating is the same as the expected rating assigned on 11 August 2023 and follows the receipt of documents conforming to information already received.

The proposed debentures will mature in five, seven and 10 years and will be listed on the Colombo Stock Exchange. COMB plans to use the proceeds to strengthen its Tier 2 capital base, raise long-term funding, bridge maturity mismatches and support loan growth. The bank expects the proposed debentures to qualify as Basel III-compliant regulatory Tier 2 capital. The debentures include a non-viability clause whereby they convert to ordinary voting shares upon the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka.

Key Rating Drivers

COMB's Sri Lankan rupee-denominated subordinated debt is rated two notches below the bank's National Long-Term Rating anchor. This reflects Fitch's baseline notching for loss severity for this type of debt and expectation of poor recoveries. There is no additional notching for non-performance risk, as the notes do not incorporate going-concern loss-absorption features.

COMB's National Long-Term Rating is used as the anchor rating for this instrument because it reflects the bank's standalone financial strength and best indicates the risk of the bank becoming non-viable.

Fitch affirmed COMB's National Long-Term Rating, removed the Rating Watch Negative and assigned a Stable Outlook on 5 October 2023; see Fitch Affirms Ratings on 15 Sri Lankan Banks; Removes Watch Negative; CBL on Negative Outlook

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

COMB's subordinated debt would be downgraded if the bank's National Long-Term Rating is downgraded.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

COMB's subordinated debt would be upgraded if the bank's National Long-Term Rating is upgraded.

Date of Relevant Committee

04 October 2023

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

Prior

Commercial Bank of Ceylon PLC

subordinated

Natl LT

BBB+(lka)

New Rating

BBB+(EXP)(lka)

Page

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VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

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