DFCC Bank delivers resilient, purpose-driven performance in Q1

• Achieves Rs. 2.9 b Group core business PAT 
• Group total capital adequacy ratio at 14.656% 
• Group total assets up 8% to Rs. 765 b
• Bank PAT of Rs. 7.8 b includes gain on disposal of 50% stake in Acuity Partners 

Chairman  J. Durairatnam

Director/CEO Thimal Perera

DFCC Bank said yesterday it showcased a strong and stable performance by delivering resilient financial results in the first quarter of 2025. 

In a statement, DFCC said the bank reported substantial growth in core areas such as loans and deposits, highlighted by a 5% increase in net interest income alongside an improvement in Current Account Savings Account (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 monetary policy stance. Lower lending rates, combined with signs of economic recovery, contributed to the accelerated growth of credit extended to the private sector by Licenced 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 sold its 50% stake (75,500,001 ordinary voting shares) in Acuity Partners Ltd. and recorded a disposal gain, net of tax, of Rs. 5,018 million, which was recorded as profit from discontinued operation. Due to the application of the equity method of accounting and recognised share of profit over the period, the disposal gain, net of tax, recorded in the Group amounted to Rs. 166 million. 

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.

DFCC Bank PLC, the largest entity within the Group, recorded a Profit Before Tax (PBT) of Rs. 3,912 million and a Profit After Tax (PAT) of Rs. 2,768 million for the period ended 31 March 2025 from its continuing operations, compared to a PBT of Rs. 4,733 million and PAT of Rs. 3,134 million in the previous period. The bank’s Earnings Per Share (EPS) from continuing banking operations was Rs. 6.38, while the EPS including the gain on disposal was Rs. 17.95.

At the Group level, PBT stood at Rs. 4,055 million, with PAT at Rs. 2,877 million from continuing operations for the period ended 31 March 2025, compared to PBT of Rs. 4,821 million and PAT of Rs. 3,191 million in 2024. 

The bank’s Return on Equity (ROE) stood at 14.46%, while the Return on Assets (ROA) before tax was 2.14% for the period ended 31 March 2025, including the gain on disposal recorded under profit for the period from discontinued operation. 

Throughout the period, driven by enhanced liquidity in the domestic money market and a more accommodative monetary policy by the Central Bank, the Average Weighted Prime Lending Rate (AWPR) has continued to decline, reaching 8.43% as of 31 March 2025, down from 10.69% as of 31 March 2024. This trend is expected to support the continued transmission of monetary easing. 

In line with policy guidance, the Bank witnessed a reduction in yields, facilitating improved financial conditions for businesses and individuals. This contributed to a 7% decline in interest income compared to 2024. The CASA ratio improved to 26.47% as at 31 March 2025 from 24.77% as at 31 December 2024. 

Net Interest Income (NII), the bank’s core earnings driver, increased by 5% to Rs. 7,409 million. The net interest margin declined from 4.18% in December 2024 to 4.10% by March 2025. 

The bank’s proactive strategies contributed to higher remittances, trade-related commissions, and other fee income, driving growth in non-funded business. An 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 Rs. 1,434 million, up from Rs. 1,154 million in 2024.

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 Rs. 1,355 million, from Rs. 1,585 million in the previous period. 

Operating expenses rose to Rs. 4,379 million (from Rs. 3,619 million in Q1 2024), primarily due to inflation and staff benefit adjustments. Nevertheless, cost control measures kept expenditure within manageable levels. 

Other Comprehensive Income (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 Rs. 570 million was recorded on equity securities, primarily due to an increase in the Commercial Bank of Ceylon PLC share price. Treasury securities added a further Rs. 618 million in gains. 

Despite challenges in the economy and the banking sector, DFCC Bank’s total assets increased by Rs. 60.3 billion, 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 Rs. 19 billion to Rs. 414 billion, reflecting a 5% increase compared to Rs. 394 billion 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 Ltd. 

DFCC Bank’s total liabilities increased by Rs. 54 billion, marking a 9% increase from December 2024. The bank’s deposit base grew by 8%, rising by Rs. 36 billion to Rs. 501 billion, up from Rs. 465 billion 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.

DFCC Bank’s total equity increased to Rs. 6 billion 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 PAT of Rs. 7.8 billion, 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. 

Director/CEO Thimal Perera said: “The Group PAT stood at Rs. 3.0 billion, while the Group EPS recorded Rs. 6.9. NII, increasing by 5% to Rs. 7.4 billion, despite a softening interest rate environment. These results reflect our disciplined approach to asset growth, cost efficiency, and effective capital deployment. The quarter also benefitted 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 Green Exchange – following its initial listing on the Colombo Stock Exchange – affirmed our leadership in sustainable finance. The Rs. 2.5 billion issuance supports renewable energy development, particularly solar power, and reinforces our alignment with global Environment, Social, and Governance (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.”