Media Centre

Financial Results for the year ended 31 December 2021.

•   Group Net Operating Income up by 8% to LKR 11 Bn
•   Group Profit After Tax of LKR 3 Bn
•   Group Total Capital Adequacy Ratio – 14.656%
•   Group Total Assets up by 8% to LKR 765 Bn

DFCC Bank showcased a strong and stable performance by delivering resilient financial results in Q1 2025. The Bank reported substantial growth in core areas such as net interest income, loans and deposits, highlighted by a 5% increase in net interest income alongside an improvement in CASA deposits. The CASA ratio improved to 26.47% as at 31 March 2025, from 24.77% recorded as at 31 December 2024. These achievements reflect DFCC Bank’s continued focus on prudent financial management and sustainable growth.

Market lending and deposit interest rates continued their downward trend, in line with the accommodative stance of monetary policy. Lower lending rates, combined with signs of economic recovery, contributed to the accelerated growth of credit extended to the private sector by Licensed Commercial Banks (LCBs), a trend expected to continue, encouraging domestic economic activity. Simultaneously, yields on government securities declined further, supported by stronger fiscal performance. In response, DFCC Bank promptly adjusted its lending and deposit rates, ensuring the effective transmission of monetary policy benefits to businesses and individuals.

The Bank enhanced its profitability through a strategic rebalancing of its investment portfolio, placing greater emphasis on high-yield government securities. Additionally, favourable macroeconomic conditions and dedicated recovery efforts led to a notable decrease in impairment provisions, thereby boosting profits.

The Bank divested its 50% ownership equating to 75,500,001 ordinary voting shares in Acuity Partners (Pvt) Ltd for LKR 6.5 Bn. This move resulted in a disposal gain of LKR 5.7 Bn for the Bank, while the Group reflected a gain of LKR 0.8 Bn in its income statement.

The following commentary relates to the unaudited financial statements for the period ended 31 March 2025, presented in accordance with Sri Lanka Accounting Standard 34 (LKAS 34) on Interim Financial Statements.

Income Statement Analysis

Profitability

DFCC Bank PLC, the largest entity within the Group, recorded a profit before tax (PBT) of LKR 3,911 Mn and a profit after tax (PAT) of LKR 2,767 Mn for the period ended 31 March 2025 from its normal banking operations, excluding the gain from the disposal of the equity investment in Acuity Partners (Pvt) Ltd, compared to a PBT of LKR 4,733 Mn and PAT of LKR 3,134 Mn in the previous period.

At the Group level, PBT stood at LKR 4,889 Mn, with PAT at LKR 3,043 Mn for the period ended 31 March 2025, compared to PBT of LKR 4,821 Mn and PAT of LKR 3,824 Mn in 2024.

The Bank’s return on equity (ROE) stood at 14.25% for the period ended 31 March 2025, with compared to 10.99% recorded for the year ended 31 December 2024, while return on assets (ROA) before tax stood at 2.28%, compared to 2.01% recoded in 2024.

The Bank’s total tax expense, including Value Added Tax (VAT), Social Security Contribution Levy (SSCL), and income tax, amounted to LKR 3,088 Mn for the period. Consequently, the Bank’s tax expense as a percentage of operating profit for the period stood at 28.40%.

Net Interest Income

Throughout the period, both deposit and lending rates declined, driven by enhanced liquidity in the domestic money market and a more accommodative monetary policy by the Central Bank. This trend is expected to support the continued transmission of monetary easing.

In line with policy guidance, the Bank reduced both lending and deposit rates, facilitating improved financial conditions for businesses and individuals. This contributed to a 7% decline in interest income compared to 2024. However, interest expense declined by 13%, aided by a 15% improvement in CASA deposits. The CASA ratio improved to 26.47% as at 31 March 2025 from 24.77% as at 31 December 2024. These dynamics led to a 5% increase in net interest income (NII).

NII—the Bank’s core earnings driver increased by 5% to LKR 7,409 Mn. The net interest margin declined from 4.18% in December 2024 to 4.10% by March 2025.

Fee and Commission Income

The Bank’s proactive strategies contributed to higher remittances, trade-related commissions, and other fee income, driving growth in non-funded business. Expansion in credit card operations also supported this increase.

To facilitate business acquisition and credit card expansion, related fee expenses increased. However, the net effect was positive. Net fee and commission income rose by 24% to LKR 1,434 Mn, up from LKR 1,154 Mn in 2024

Sale of Stake in Acuity Partners (Pvt) Ltd

The Bank sold its 50% stake (75,500,001 ordinary voting shares) in Acuity Partners (Pvt) Ltd for LKR 6.5 Bn and recorded a disposal gain of LKR 5.7 Bn. Due to the application of equity method of accounting and recognised share of profit over the period, the disposal gain recorded in the Group amounted to LKR 0.8 Bn

Impairment Charge on Loans and Other Losses

The Stage 3 impaired loan ratio improved from 5.65% (December 2024) to 5.38% (March 2025), driven by recovery efforts, portfolio growth, and write-offs.

Impairment provisions were prudently made, incorporating model calibrations and additional buffers for high-risk sectors. Reflecting macroeconomic recovery and recoveries, impairment charges fell to LKR 1,355 Mn, from LKR 1,585 Mn in the previous period.

Operating Expenses

Operating expenses rose to LKR 4,380 Mn (from LKR 3,619 Mn in Q1 2024), primarily due to inflation and staff benefit adjustments. Nevertheless, cost control measures kept expenditure within manageable levels.

Other Comprehensive Income (OCI)

OCI included fair value changes in equity and fixed-income securities and hedging reserve movements. Hedge accounting helped limit exchange rate volatility. A fair value gain of LKR 570 Mn was recorded on equity securities, primarily due to an increase in the Commercial Bank of Ceylon PLC share price. Treasury securities added a further LKR 618 Mn in gains.

Financial Position Analysis

Assets

Despite challenges in the economy and the banking sector, DFCC Bank’s total assets increased by LKR 60.3 Bn, recording a 9% growth from December 2024. In line with the Bank’s growth strategy and the prevailing economic conditions, the Bank’s net loan portfolio grew by LKR 19 Bn to LKR 414 Bn, reflecting a 5% increase compared to LKR 394 Bn as at 31 December 2024. Moreover, in line with its strategic decision to explore divestment opportunities, the Bank disposed of its 50% ownership of its joint venture investment in Acuity Partners Private Limited.

Liabilities

DFCC Bank’s total liabilities increased by LKR 54 Bn, marking a 9% increase from December 2024. The Bank’s deposit base grew by 8%, rising by LKR 36 Bn to LKR 501 Bn, up from LKR 465 Bn as at 31 December 2024. This resulted in a loan-to-deposit ratio of 92.02% as at 31 March 2025. The CASA ratio stood at 26.47% as at 31 March 2025.

To manage funding costs, the Bank leveraged medium- to long-term concessionary credit lines, which were primarily utilised to expand the lending portfolio and provide much-needed concessionary funding to customers. Considering these term borrowings, the CASA ratio improved to 32.66%, while the loan-to-deposit ratio recorded at 84.27% as at 31 March 2025.

Equity and Compliance with Capital Requirements

DFCC Bank’s total equity increased to LKR 6 Bn as at 31 March 2025, supported by favourable movements in the equity and fixed-income security portfolios classified under fair value through other comprehensive income, as well as positive movements in the hedging reserve. This, combined with a recorded profit after tax of LKR 7.8 Bn, further strengthened the Bank’s capital position.

Accordingly, the Tier 1 and Total Capital ratios stood at 10.891% and 13.501%, respectively, as at 31 March 2025, compared to 12.402% and 15.759%, respectively, as at 31 December 2024. The Bank’s Net Stable Funding Ratio (NSFR) stood at 118.15%, and the Liquidity Coverage Ratio (LCR) – all currency – was 255.07% as at 31 March 2025, compared to 124.60% and 280.26%, respectively, as at 31 December 2024. These ratios remained well above the minimum regulatory requirements.

CEO’s Statement

The Group Profit After Tax stood at LKR 3.0 Bn, while the Group Earning Per Share (EPS) recorded to LKR 6.9. Net Interest Income increasing by 5% to LKR 7.4 Bn, despite a softening interest rate environment. These results reflect our disciplined approach to asset growth, cost efficiency, and effective capital deployment. The quarter also benefited from the strategic disposal of our 50% stake in Acuity Partners, which contributed meaningfully to the uplift in earnings and strengthened our capital position for future investments.

Asset quality continued to improve, with the Stage 3 impaired loan ratio declining to 5.38%, supported by proactive recoveries and favourable macroeconomic trends. Impairment provisions reduced by 14% year-on-year, and our CASA ratio rose to 26.47%, strengthening our low-cost funding base. The Bank maintained a Total Capital Ratio of 13.50% and a Liquidity Coverage Ratio of 255.07%, well above regulatory requirements – further demonstrating our financial stability and resilience.

During the quarter, the dual listing of Sri Lanka’s first Green Bond on the Luxembourg Stock Exchange and the Luxembourg Green Exchange – following its initial listing on the Colombo Stock Exchange – affirmed our leadership in sustainable finance. The LKR 2.5 Bn issuance supports renewable energy development, particularly solar power, and reinforces our alignment with global ESG standards.

We also continued to enhance customer value through integrated banking propositions tailored to evolving life-stage needs. Our home ownership offering – one of the fastest and most transparent in the market – prioritised speed, clarity, and trust, while our mobility proposition focused on making vehicle ownership more accessible through breakthrough, affordable financing. In the informal lending space, we expanded access through gold-backed solutions designed for flexibility and immediacy. We also strengthened our engagement with Sri Lankans living abroad through a dedicated remittance proposition – delivering secure, convenient, and emotionally meaningful ways for families to stay connected and supported across borders.

As DFCC Bank celebrates its 70th anniversary, we remain steadfast in our mission to deliver financial solutions with purpose – fostering long-term value creation for our customers, communities, and stakeholders, both in Sri Lanka and across the world.

Thimal Perera
Director / Chief Executive Officer