Fitch Ratings has downgraded National Development Bank PLC’s National Long-Term Rating to ‘A-(lka)’ from ‘A(lka)’ and placed the bank on a Negative outlook, marking the first formal credit action since the Rs. 13.2 billion internal fraud was disclosed last week.
The rating agency estimated gross losses at approximately 2.3% of NDB’s risk-weighted assets at end-2025, calling the fraud “significant relative to the bank’s capital buffers.” NDB’s CET1 capital ratio, reported at 12.9% at end-2025, is expected to decline by roughly 1.1 percentage points once losses are fully absorbed.
Fitch cited deficiencies in NDB’s internal risk controls as a key driver, noting that operating profit relative to risk-weighted assets is expected to fall below 2% — below the levels maintained by peer banks. The Central Bank of Sri Lanka has suspended cash dividends until capital buffers are restored.
The agency also downgraded NDB’s Basel III subordinated debentures to ‘BBB(lka)’ from ‘BBB+(lka)’, reflecting the weakened creditworthiness of the parent.
The Negative outlook signals further downgrade risk if capital buffers weaken, liquidity stress materialises, or regulatory sanctions impair NDB’s franchise. Conversely, the outlook could be revised to Stable if capital is restored to levels comparable with peers.
Fitch noted NDB’s loan-to-deposit ratio stood at 91% and its liquidity coverage ratio at 209%, providing some buffer against near-term funding pressures.
The downgrade directly raises NDB’s borrowing costs at a time when the bank faces a parliamentary inquiry into the fraud and an ongoing CID investigation that has resulted in four arrests so far.
