Sri Lanka’s Nations Trust Bank has announced a proposed debenture issue amounting to 15 billion rupees, which has received an expected National Long-Term Rating of ‘BBB+(lka)(EXP)’ from Fitch Ratings. Fitch has utilized NTB’s National Long-Term Rating as the anchor rating for this instrument, as it reflects the bank’s standalone financial strength and best indicates the risk of the bank becoming non-viable.

The debentures, which are set to have maturities of 5, 7, and 10 years, will be listed on the Colombo Stock Exchange. The bank intends to use the proceeds to bolster its Tier 2 capital, support the expansion of its loan portfolio, and mitigate maturity mismatches on its balance sheet.

The proposed debentures are anticipated to qualify as Basel III-compliant regulatory Tier 2 capital. These debentures include a non-viability clause, which stipulates conversion to ordinary voting shares upon the occurrence of a trigger event, as determined by the Governing Board of the Central Bank of Sri Lanka. The final rating will be confirmed upon receipt of final documentation conforming to the information already received.

Key Rating Drivers

The Sri Lankan rupee-denominated subordinated debt of NTB 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 expectations of poor recoveries. There is no additional notching for non-performance risks as the notes do not incorporate going-concern loss-absorption features. NTB’s National Long-Term Rating serves as the anchor rating for this instrument, indicating the bank’s standalone financial strength and the risk of becoming non-viable.

Fitch reviewed NTB’s ratings with no rating action on September 8, 2025. Further details can be found in the latest rating action commentary, “Fitch Upgrades 10 Sri Lankan Banks’ National Ratings and Affirms Five after Scale Recalibration,” published on January 21, 2025.

Rating Sensitivities

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

A downgrade of the bank’s National Long-Term Rating would result in a downgrade of the expected rating.

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

An upgrade of the bank’s National Long-Term Rating would result in an upgrade of the expected rating.

(Colombo/Jan19/2026)