ECONOMYNEXT – DFCC Bank’s proposed green bond to raise 10 billion Sri Lanka rupees has been given an expected national long-term rating of ‘BBB+(EXP)(lka)’ by Fitch Ratings.
The bonds include a non-viability clause whereby they will convert to ordinary voting shares subject to the occurrence of a trigger event.
The Fitch statement is reproduced below:
Fitch Rates DFCC Bank’s Basel III Subordinated Green, Social and Sustainable Bond ‘BBB+(EXP)(lka)’
Fitch Ratings – Colombo Fitch Ratings has assigned DFCC Bank PLC’s (A(lka)/Stable) proposed Basel III-compliant subordinated, unsecured, green, social and sustainable (GSS+) bonds of up to LKR10 billion an expected National Long-Term Rating of ‘BBB+(EXP)(lka)’.
The proposed bonds will mature in five, seven and 10 years and will be listed on the Colombo Stock Exchange. The bank plans to use the proceeds to strengthen its Tier 2 capital base and to support its loan book expansion through financing GSS+ projects.
The bank expects the proposed bonds to qualify as Basel III-compliant regulatory Tier 2 capital. The bonds include a non-viability clause whereby they will convert to ordinary voting shares subject to the occurrence of a trigger event, as determined by the Governing Board of the Central Bank of Sri Lanka.
The final rating is subject to the receipt of final documentation conforming to information already received.
Key Rating Drivers
DFCC’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 our expectations of poor recoveries. There is no additional notching for non-performance risks as the notes do not incorporate going-concern loss-absorption features.
DFCC’s National Long-Term Rating is used as the anchor rating for this instrument because the rating reflects the bank’s standalone financial strength and best indicates the risk of the bank becoming non-viable.
Fitch reviewed DFCC’s ratings with no rating action on 8 September 2025. See our latest rating action commentary, Fitch Upgrades 10 Sri Lankan Banks’ National Ratings and Affirms Five after Scale Recalibration, published on 21 January 2025, for the key rating drivers and sensitivities.
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 lead to 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 lead to an upgrade of the expected rating.
(Colombo/Nov20/2025)