Fitch Ratings has upgraded Bank of Ceylon’s Long-Term Foreign- and Local-Currency Issuer Default Ratings to ‘B-’ from ‘CCC+’, with a stable outlook, Hiru News reported.
The agency also raised BOC’s Viability Rating to ‘b-’ from ‘ccc+’ and its Short-Term IDR to ‘B’ from ‘C’. The Government Support Rating was affirmed at ‘ns’ — no support.
It follows the sovereign, not the bank
The action is a consequence of Sri Lanka’s own upgrade rather than a standalone verdict on the bank. Fitch raised the sovereign’s long-term IDRs to ‘B-’/Stable from ‘CCC+’ on 22 September, a move that lifted the Colombo bourse at the time.
Because the sovereign credit profile is the binding constraint on BOC’s ratings, the bank could not be rated above it. Fitch said the stronger sovereign profile has eased external financing risks and improved the economy’s resilience to shocks, and it lifted its operating environment score for Sri Lankan banks to ‘b-’ from ‘ccc+’ accordingly.
What changed underneath
Fitch revised up five component scores, per the full rating action published by Lanka Business Online:
| Score | New | Previous |
|---|---|---|
| Business profile | b | b- |
| Risk profile and asset quality | b- | ccc+ |
| Earnings and profitability | b | b- |
| Capitalisation and leverage | b- | ccc+ |
| Funding and liquidity | b- | ccc+ |
The business profile upgrade reflects BOC’s position as Sri Lanka’s largest bank, holding roughly 22% of sector assets and deposits.
The sovereign exposure cuts both ways
Fitch estimates that sovereign bonds and loans to state-owned entities made up about 60% of BOC’s total assets at the end of the first quarter of 2026, including treasury securities held for liquidity.
That concentration is why the bank’s fortunes track the state’s so closely: the same exposure that dragged its ratings down through the default years is now pulling them up. Fitch cautioned that the sector remains closely tied to the domestic economy through government securities and public-sector lending.
It also flagged a near-term cost. While stronger economic resilience should lower earnings volatility over the medium term, higher funding costs and lower interest income from government securities could weigh on profitability in the short run.
The Government Support Rating stayed at ‘ns’ because the government’s weak finances and modest foreign reserves still constrain its capacity to provide extraordinary support — an assessment the upgrade did not change.
Fitch disclosed that BOC holds a 1.78% equity stake in Fitch Ratings Lanka Ltd, while noting that no shareholder other than Fitch, Inc. takes part in its day-to-day rating operations.
What would move the ratings again
Fitch said a downgrade would most likely follow a sovereign downgrade, a significant deterioration in the operating environment, or renewed foreign-currency funding constraints. A further upgrade would likewise depend mainly on continued improvement in the sovereign profile.
