Our strong financial performance in 2024 was evident in the expansion of total assets, a growing deposit base, and increased profitability. We achieved a significant rise in Profit After Tax (PAT) compared to 2023, reinforcing our dedication to prudent financial management and sustainable growth. Strategic investments in high-yield government securities enhanced our net interest income, while a focused approach to fee generation strengthened our non-funded business. Despite economic challenges, we upheld resilient credit quality and further reinforced our capital position.

Overview

In a dynamic banking landscape, DFCC Bank demonstrated resilience amidst industry challenges. With robust 2024 financial results including notable growth in total assets, loan portfolio and deposit base, and a remarkable 16% rise in PAT – DFCC Bank demonstrated its commitment to prudent financial management and sustainable long-term growth.

With the improvement in domestic money market liquidity, driven by the Central Bank’s relaxed monetary policy stance, both deposit and lending interest rates continued their downward adjustment throughout the year. This trend is expected to persist, further transmitting the benefits of policy easing. Market interest rates, which declined in response to the accommodative monetary policy stance, largely stabilised by year-end. Benefiting from lower lending rates, credit to the private sector extended by Licensed Commercial Banks (LCBs) has expanded notably since May 2024. In alignment with this shift, DFCC Bank swiftly adjusted its lending and deposit rates, ensuring the effective transmission of monetary policy benefits to businesses and individuals.

Moreover, the Bank strategically enhanced profitability by optimising its investment portfolio, notably increasing holdings in high-yield government securities. This, alongside positive macroeconomic developments and the Bank’s focused recovery efforts, led to a significant reduction in impairment provisions, positively impacting the income statement.

Despite ongoing economic challenges, we have upheld strong credit quality and reinforced our capital position, as reflected in improved equity ratios and strict regulatory compliance. Our commitment to innovation and customer-centric values continues to be recognised, further solidifying DFCC Bank’s leadership in the banking sector.

A significant milestone of the year was the issuance of Sri Lanka’s first-ever listed and rated Green Bond, which was highly oversubscribed. This achievement underscores the trust and confidence valued investors and stakeholders have placed in the Bank and its unwavering commitment to sustainability. Looking ahead, we remain dedicated to driving inclusive growth, advancing sustainability, and delivering long-term value to all stakeholders.

Additionally, in January 2025, Fitch Ratings upgraded the Bank’s National Long-Term Rating to A(lka) with a stable outlook from A-(lka), reflecting the Bank’s strengthened stability.

DFCC Bank has been honoured with three prestigious awards at the Global Banking and Finance Awards 2024, reinforcing its position as a customer-focused and sustainable banking leader in Sri Lanka. The Bank received recognition as the Banking Brand of the Year Sri Lanka 2024, Best Bank for Sustainable Development Sri Lanka 2024, and Fastest Growing Retail Bank Sri Lanka 2024. These independent accolades, presented by the UK-based Global Banking and Finance Review, underscore the Bank’s unwavering commitment to innovation, sustainability, and customer-centric growth.

Income Statement Analysis

Profitability

In 2024, DFCC Bank PLC, the largest entity within the Group, reported a Profit Before Tax (PBT) of LKR 13,498 Mn and a PAT of LKR 8,353 Mn, reflecting a 16% increase from the previous year’s PAT of LKR 7,220 Mn. The Bank also recorded a 12% rise in Earnings Per Share (EPS) to LKR 19.40, demonstrating its strong financial performance and continued growth momentum.

The Group reported a PBT of LKR 13,820 Mn and a PAT of LKR 9,932 Mn, which includes LKR 1,378 Mn from discontinued operations for the year ended 31 December 2024. This marks an increase from LKR 11,369 Mn and LKR 8,659 Mn, respectively, in 2024 and 2023. The Group recorded a 11% rise in EPS from continuing operation to LKR 19.51 compared to LKR 17.58 in 2023.

The Bank’s Return on Assets (ROA) before tax improved to 2.01%, up from 1.82% in the previous year while Return on Equity (ROE) stood at 10.99% for 2024, compared to 12.19% in 2023.

The Group’s Return on Assets (ROA) before tax improved to 2.07% up from 1.88% in previous year while Return on Equity (ROE) stood at 13.95 in both 2024 and 2023.

The Bank’s total tax expense, comprising Value Added Tax (VAT), Social Security Contribution Levy (SSCL) on financial services, and Income Tax, amounted to LKR 9,562 Mn for the year ended 31 December 2024. Consequently, the Bank’s tax expense as a percentage of operating profit stood at 53.37% for the year.

Net Interest Income

With improved liquidity conditions in the domestic money market, driven by the Central Bank’s relaxed monetary policy stance, both deposit and lending interest rates have continued their downward adjustment throughout the year. This trend is expected to persist, further transmitting the benefits of policy easing through lower lending rates. Market interest rates, which declined over time in response to accommodative monetary policies, largely stabilised by year-end.

Supported by reduced market lending rates, credit extended to the private sector by LCBs has expanded notably since May 2024. Sectoral data for Q3-2024 indicates broad-based credit growth across all major economic sectors, with the expansionary momentum expected to continue, driven by favourable lending conditions. Meanwhile, improved fiscal performance, a low inflation outlook, and stable economic conditions have contributed to easing pressures on government bond yields.

Accordingly, the Bank has witnessed significant reductions in lending and deposit rates, aligning with monetary directives to ease financial conditions for individuals and businesses. This swift adjustment supports the anticipated economic re bound. The lower interest rates have led to a decline in both interest income and expenses compared to 2023.

The Bank’s Net Interest Income (NII), which is income from its core business, declined by 10% to LKR 28,121 Mn for the year 2024. Meanwhile, the interest margin contracted from 5.18% in December 2023 to 4.18% in December 2024.

Fee and Commission Income

The Bank’s dynamic strategies and the efforts of its dedicated teams drove growth in remittances, trade-related commissions, and other fee income lines, contributing to the expansion of its non-funded business. Further, the increased focus on credit card operations played a key role in boosting fee and commission income compared to 2023. Related fee expenses also rose in line with the Bank’s objective to expand credit card services and acquire new business. However, the net impact remained positive, with net fee and commission income increasing by 8% to LKR 4,929 Mn for the year ended 31 December 2024, compared to LKR 4,551 Mn in 2023.

Net Gains from De-recognition of Financial Assets

The Bank disposed of a portion of its Sri Lankan government securities holding classified under FVOCI, realising a gain of LKR 2,877 Mn, underscoring the effectiveness of its strategic decisions. Additionally, leveraging market opportunities following the finalisation of debt restructuring, the sale of the Bank’s International Sovereign Bond (ISB) holdings contributed a positive LKR 991 Mn impact through the related cumulative impairment reversal.

Impairment Charge on Loans and Other Losses

The impaired loan (Stage 3) ratio declined from 7.03% in December 2023 to 5.65% as of 31 December 2024, driven by the combined effects of the Bank’s focused recovery efforts, write-offs of long outstanding overdue balances, and significant portfolio growth in line with the positive macroeconomic developments. To mitigate current and potential future risks in its lending portfolio, the Bank maintained adequate impairment provisions, continuously calibrating internal models to account for emerging risk factors. Additional provisions were also allocated for risk-elevated sectors. Reflecting favourable macroeconomic conditions and the Bank’s sustained recovery initiatives, impairment charges for loans and advances significantly improved to LKR 4,648 Mn for the year ended 31 December 2024, compared to LKR 13,985 Mn in 2023.

Operating Expenses

Operating expenses for the year ended 31 December 2024 rose to LKR 16,805 Mn, up from LKR 12,366 Mn in 2023, primarily driven by inflationary pressures and adjustments to staff benefits. The increase in personal expenses reflects salary increments and performance-based incentives. However, the Bank has implemented comprehensive cost-control measures, effectively managing and curtailing expenses to maintain operational efficiency.

Other Comprehensive Income (OCI)

Changes in the fair value of investments in equity securities and fixed-income securities (treasury bills and bonds), along with movements in hedging reserves, are recorded through other comprehensive income. The application of hedge accounting minimised the impact of exchange rate fluctuations on the Bank’s total equity.

A fair value gain of LKR 9,119 Mn was recorded on equity securities outstanding as of 31 December 2024, primarily driven by the increase in the share price of Commercial Bank of Ceylon PLC. Additionally, fair value gains on treasury bill and bond yields amounted to LKR 3,789 Mn during the year.

Financial Position Analysis

Assets

Despite economic challenges in the banking sector, DFCC Bank’s total assets grew by LKR 62.6 Bn, reflecting a 10% increase from December 2023. Aligned with the Bank’s growth strategy and economic conditions, a 55% rise in fixed-income securities investments contributed to increased financial assets at amortised cost, reaching LKR 106 Bn as at 31 December 2024, compared to the previous year.

Further, the Bank’s net loan portfolio expanded by LKR 46 Bn to LKR 394 Bn, a 13% increase from LKR 349 Bn as of end 2023, further driving asset growth. In line with its strategic direction, the Bank has also designated its joint venture investment as an asset held for sale, seeking to divest its 50% ownership in Acuity Partners Private Limited.

Liabilities

The Bank’s total liabilities increased by LKR 46 Bn, reflecting an 8% growth from December 2023. The deposit base expanded by 14%, rising by LKR 58 Bn to LKR 465 Bn, up from LKR 407 Bn as of 31 December 2024, resulting in an improved loan-to-deposit ratio of 94.79%.

Additionally, the CASA ratio stood at 24.77% as of 31 December 2024. The Bank effectively contained funding costs by utilising medium to long-term concessionary credit lines, which supported the expansion of the lending portfolio and provided much-needed concessionary funding to customers. Factoring in these concessionary term borrowings, the CASA ratio further improved to 31.82%, while the loan-to-deposit ratio improved to 85.90% as of 31 December 2024.

Equity and Compliance with Capital Requirements

DFCC Bank’s total equity increased to LKR 84 Bn as of 31 December 2024, driven by favourable movements in the equity and fixed-income security portfolios classified as fair value through other comprehensive income, along with positive shifts in the hedging reserve and the PAT for the year of LKR 8.4 Bn.

As a result, the Tier 1 and Total Capital ratios improved to 12.402% and 15.759%, respectively, by 31 December 2024, compared to 11.490% and 13.511% respectively as of 31 December 2023. The Bank’s Net Stable Funding Ratio (NSFR) remained at 124.60%, while the Liquidity Coverage Ratio (LCR) – all currency stood at 280.26% as of 31 December 2024, both at levels well above the minimum regulatory requirements.

Credit Quality

In line with its prudent lending policies, the Bank adopted a measured approach to growth, refraining from aggressive expansion, particularly in stress-prone sectors. During the year, moderate loan book growth was recorded across the corporate, retail, and SME segments. Expanding into new geographical areas and customer segments presented challenges in maintaining a sustainable risk profile. To address this, the Bank strengthened its pre- and post-credit monitoring mechanisms, enhancing internal processes and implementing timely recovery actions.

Dividend Policy

The Bank’s dividend policy seeks to maximize shareholder wealth while ensuring adequate capital for expansion, as it leverages its island-wide presence and investments in technology. Accordingly, the Board of Directors has approved a final dividend of LKR 6.00 per share, comprising LKR 4.00 per share in cash and LKR 2.00 as a scrip dividend for the year ended 31 December 2024, balancing shareholder returns with long-term business plans. Consequently, the dividend payout ratio for the year exceeds 33% of the distributable profit.

Group Performance

The DFCC Group consists of DFCC Bank PLC and its subsidiaries: DFCC Consulting (Pvt) Limited (DFCC Consulting), Lanka Industrial Estates Limited (LINDEL), Synapsys Limited (Synapsys), along with its Assets held for sale: Acuity Partners (Pvt) Limited (Acuity), and its associate company, National Asset Management Limited (NAMAL). In alignment with DFCC Bank’s strategic realignment of its group structure, the Bank divested its 50% stake in Acuity Partners to Hatton National Bank in January 2025. This move allows DFCC Bank to focus on its core banking and financial services operations.

The Group made a PAT of LKR 9,932 Mn for the year ended 31 December 2024, compared to LKR 8,659 Mn made in 2023. DFCC Bank accounted for the majority of the Group profit, with PAT of LKR 8,353 Mn, while LINDEL LKR 317 Mn, Acuity LKR 2,756 Mn, and DFCC Consulting LKR 1.1 Mn too contributed positively by way of PAT to the Group. Synapsys reported a loss of LKR 20 Mn. In the previous year, LINDEL, Acuity, Synapsys, and DFCC Consulting, reported PAT of LKR 356 Mn, 2,279 Mn, LKR 49 Mn, and LKR 0.31 Mn respectively. The associate company, NAMAL, contributed LKR 5 Mn, to the Group in each of the years 2024 and 2023.

Economic Value Created and Distributed – Bank

	For the year ended 31 December 2024			For the year ended 31 December 2023
	LKR Mn	%		LKR Mn	%
Economic value added
Interest income	76,907			96,922
Net fee and commission income	4,929			4,551
Net gains from trading	1,273			1,055
Net gains from derecognition of financial assets	3,868			2,839
Net other operating income	1,176			828
	88,153			106,195
Economic value distributed
To lenders as interest	48,786	55.34		65,697	61.86
To providers of supplies and services	7,167	8.13		6,261	5.90
To employees as emoluments	8,328	9.45		4,778	4.50
To Government as taxation	9,645	10.94		7,119	6.70
To community (CSR related activities)	10	0.01		11	0.01
To shareholders as dividends	2,110	2.39		805	0.76
Retained in the business
Depreciation and amortisation	1,216	1.38		1,124	1.06
Reserves	6,243	7.08		6,414	6.04
Provision for losses	4,648	5.27		13,985	13.17
Total economic value distributed	88,153	100.00		106,195	100.00