ECONOMYNEXT – Fitch Ratings has affirmed Standard Chartered Bank, Sri Lanka’s National Long-Term Rating at ‘AAA(lka)’ based on support from its parent Standard Chartered Bank and following the sale of its retail business.
The sale of local entity’s wealth and retail banking business to DFCC Bank is expected to close in 3Q26.
“We expect SCBSL to focus on the corporate and institutional banking segment, where the branch has a strong domestic franchise.”
The full statement is reproduced below:
Fitch Affirms Standard Chartered Bank, Sri Lanka at ‘AAA(lka)’; Outlook Stable
Fitch Ratings – Colombo/Singapore – 20 Feb 2026: Fitch Ratings has affirmed Standard Chartered Bank, Sri Lanka’s (SCBSL) National Long-Term Rating at ‘AAA(lka)’. The Outlook is Stable.
Key Rating Drivers
Strong Parental Support: SCBSL’s rating is underpinned by Fitch’s expectation of a high probability of support from the head office of Standard Chartered Bank (SCB, A+/Stable/a), if required, subject to any regulatory constraints on remittances into Sri Lanka. This expectation is driven by SCBSL’s status as a branch of SCB, and therefore forming part of the same legal entity.
SCB’s Long-Term Issuer Default Rating (IDR) is significantly higher than Sri Lanka’s Long-Term Local-Currency IDR of ‘CCC+’, and the branch’s support-driven credit profile is one of the strongest among Fitch-rated domestic entities. Consequently, SCBSL’s rating is at the highest end of Sri Lanka’s National Rating scale.
Close Linkages: The high probability of support is underpinned by the alignment of SCBSL’s and the group’s strategic objectives and their robust operational integration. SCBSL’s small size, at only about 0.1% of SCB’s total assets, implies that support, if needed, would be immaterial to the head office.
WRB Business Divested: Fitch expects the sale of SCBSL’s wealth and retail banking (WRB) business to DFCC Bank PLC (A(lka)/Stable) to close in 3Q26. SCBSL had announced in March 2025 that it was exploring the sale of its WRB business in Sri Lanka as part of its group strategy. We expect SCBSL to focus on the corporate and institutional banking segment, where the branch has a strong domestic franchise.
LDR to Increase: We expect the branch’s loan/deposit ratio (LDR) to rise to hover between 40% and 50% from 34.5% at end-3Q25 (2024: 40.7%), on a normalised basis, following the sale of its WRB business, due to the WRB’s higher deposit balance relative to its loans. That said, we expect the balance sheet to remain liquid with over 30% of assets maintained in government securities, in addition to short-term placements with domestic banks and intragroup receivables (3Q25: 36% of assets).
High Capital Buffers: The branch’s core capitalisation metric – the regulatory common equity Tier 1 (CET1) ratio – remained high at 38.1% at end-3Q25 (end-2024: 41.6%). We estimate the CET1 ratio would rise to about 45% if it were to include 9M25 profit. The branch has not repatriated profits since 2019, and Fitch expects it to retain earnings to support tightening of single-borrower limits and an expanding loan book.
Benign Asset Quality: SCBSL’s stage 3 loan ratio continued to improve, falling to 3.3% by end-3Q25 from 7.5% at end-2024, driven by improved borrower repayment capacity as well as borrower upgrades due to easing country risks. Fitch expects asset quality to remain stable in the near term, supported by improved operating conditions. Profitability was supported by large credit write-backs, amounting to over 10% of average gross loans in 9M25, which offset lower net interest income.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
SCBSL’s National Rating would most likely be downgraded on material changes to Fitch’s expectation of support from SCB, such as a change in the branch’s legal status or the branch being divested. A downgrade of the sovereign’s Long-Term Local-Currency IDR or other developments that affect the branch’s ability to service its obligations could also lead to a multiple-notch downgrade of SCBSL’s National Rating.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
There is no rating upside for the National Long-Term Rating, as it is already at the highest point on the scale.
(Colombo/Feb20/2026)