FINANCIAL CHRONICLE – The Nations Trust Bank (NTB) of Sri Lanka has announced a proposed issuance of Basel III-compliant debentures totaling 15 billion rupees, which has been given a final National Long-Term Rating of ‘BBB+(lka)’ by Fitch Ratings. This rating is based on the bank’s creditworthiness.
According to Fitch, NTB’s National Long-Term Rating serves as the benchmark for this financial instrument, as it accurately reflects the bank’s independent financial stability and the associated risks of it becoming unviable.
The funds raised through this issuance are intended to bolster the bank’s capital base, facilitate the growth of its lending portfolio, and mitigate maturity mismatches within its financial statements.
The following is a detailed statement:
Fitch Ratings – Colombo – 15 June 2026: Fitch Ratings has assigned a final National Long-Term Rating of ‘BBB+(lka)’ to the proposed subordinated unsecured debentures by Nations Trust Bank PLC (NTB, A(lka)/Stable), which are denominated in Sri Lankan rupees and comply with Basel III regulations. The total amount for the debentures is set at LKR 15 billion.
These debentures will be available in maturities of five, seven, and ten years and will be listed on the Colombo Stock Exchange. The proceeds will be utilized to enhance the bank’s Tier 2 capital, support the growth of its loan portfolio, and address maturity mismatches on its balance sheet.
NTB anticipates that these debentures will qualify as regulatory Tier 2 capital in accordance with Basel III standards. Importantly, the debentures include a non-viability clause, which allows for conversion into ordinary voting shares if a trigger event occurs, as defined by the Central Bank of Sri Lanka’s Governing Board.
This final rating matches the expected rating issued on 15 January 2026 and comes after the bank submitted documentation that confirmed previously provided information.
Key Rating Drivers:
The debentures are rated two levels below the bank’s National Long-Term Rating due to Fitch’s standard notching for loss severity associated with this debt type and the anticipated low recovery rates. There is no additional notching related to non-performance risk, as the proposed notes lack features for loss absorption during ongoing concerns.
Fitch referenced NTB’s National Long-Term Rating as the foundational rating for this instrument, highlighting its reflection of the bank’s standalone financial strength and the potential risk of non-viability.
On 8 September 2025, Fitch reviewed NTB’s ratings without taking any action. For additional insights, refer to our recent commentary on rating actions, “Fitch Upgrades 10 Sri Lankan Banks’ National Ratings and Affirms Five after Scale Recalibration,” published on 21 January 2025, which discusses key rating drivers and sensitivities.
Rating Sensitivities:
Potential factors that could lead to a negative rating action or downgrade include a reduction in the bank’s National Long-Term Rating, which would directly impact the rating of the subordinated debt.
Conversely, any upgrade to the bank’s National Long-Term Rating would similarly result in an upgrade of the subordinated debt rating.
