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DFCC Bank delivers strong financial performance despite adverse market conditions

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The following commentary relates to the unaudited Financial Statements for the period ended 31 March 2023, presented in accordance with Sri Lanka Accounting Standard 34 (LKAS 34) on “Interim Financial Statements”.

Financial Performance

Profitability

DFCC Bank PLC, the largest entity within the Group, reported a Profit Before Tax (PBT) of LKR 2,684 Mn and a Profit After Tax (PAT) of LKR 1,749 Mn for the quarter ended 31 March 2023. This compares with a PBT of LKR 143 Mn and a PAT of LKR 366 Mn in the previous period.

The Group recorded a PBT of LKR 3,001 Mn and PAT of LKR 2,062 Mn for the quarter ended 31 March 2023 as compared to LKR 326 Mn and LKR 527 Mn respectively in 2022. All the member entities of the Group made positive contributions to this performance.

The Bank’s Return on Equity (ROE) increased to 10.88% during the quarter ended 31 March 2023 from 5.04% recorded for the year ended 31 December 2022. The Bank’s Return on Assets (ROA) before tax for the quarter ended 31 March 2023 is 1.63% compared to 0.46% for the year ended 31 December 2022.

Net Interest Income

The Bank’s Net Interest Income (NII), increased by 75% over Q1 of 2022 to reach LKR 8.34 Bn by the quarter end of March 2023. The tight liquidity conditions in the domestic money market have resulted in rising market interest rates. As a result, the Bank’s deposit and lending products experienced a significant increase in interest rates during the period under review. While the higher interest rates may have continued to depress the lending portfolio, it led to an overall improvement in Net Interest income (NII). Strategically, the Bank increased the fixed income investment portfolio, which contributed significantly to an increase in investment interest income. In line with the increase in the AWPLR over the past 12 months, the interest margin increased from 3.80% in March 2022 to 5.93% by March 2023.

Fee and Commission Income

The untiring efforts of the Bank’s staff led to increased remittances, trade-related commissions and other fee income lines which contributed to the increase of non-funded business during the period. Fee income generated by credit cards also increased significantly in line with the volume of the transactions. Accordingly, net fee and commission income have increased to LKR 1,064 Mn for the quarter ended 31 March 2023, compared to LKR 639 Mn in the comparative period in the year 2022.

Impairment Charge on Loans and Other Losses

The impaired loan (stage 3) ratio has increased from 4.36% in December 2022 to 4.80% as of 31 March 2023, a continuation of the trend in the prevailing economic condition. To address the current and potential future impacts of the current economic conditions on the lending portfolio, the Bank made adequate impairment provisions during the period by introducing changes to internal models to account for unseen risk factors in the current highly uncertain and volatile environment. With these provisions made to cover the additional risks in the economic environment, the impairment charge recorded an increase of 67% against the comparative period and stood at LKR 4.69 Bn for the quarter ended 31 March 2023 compared to LKR 2.81 Bn in the comparable period.

Operating Expenses

The operating expenses for the quarter ended on 31 March 2023 increased due to an increase in IT-related expenses as a result of infrastructure upgrades, as well as cost increases due to inflation and the Sri Lanka Rupee devaluation. However, the numerous process automation and workflow management systems introduced over the period helped curtail and manage operating expenses at reduced levels.

Other Comprehensive Income

Changes in the fair value of investments in equity securities and fixed income securities (treasury bills and bonds) and movement in hedging reserves are recorded through other comprehensive income.

Due to the application of hedge accounting, the impact on the bank equity due to the exchange fluctuation was minimized. A fair value gain of LKR 2,034 Mn was recorded on account of equity securities outstanding as at 31 March 2023. The increase in the share price of Commercial Bank of Ceylon PLC during the period was the main contributor to the reported fair value gain in equity securities. The favourable movement in the treasury bills and bonds yields resulted in a fair value gain of LKR 908 Mn during the period.

Business Growth

Assets

Despite the challenges faced by the economy and the banking sector, DFCC Bank’s total assets increased by LKR 9.8 Bn, recording a growth of 1.75% from December 2022. In line with the bank’s growth strategy and the current economic situation, an increase in investment in fixed income securities, combined with positive fair value movement in both fixed income securities and equity securities, has contributed to a 49% increase in investment in financial assets at fair value through other comprehensive income as of 31 March 2023 compared to the balance as of 31 December 2022. With increased provision for expected credit losses and appreciation of the Sri Lanka Rupee, the net loan portfolio has recorded LKR 357 Bn as at 31 March 2023.

Liabilities

The Bank’s deposit base experienced a growth of 2.29%, recording an increase of LKR 8,490 Mn to LKR 378,805 Mn from LKR 370,314 Mn as at 31 December 2022. This resulted in recording a loan to deposit ratio of 104.33%. Further the CASA ratio is 18.05% as at 31 March 2023. The Bank’s funding costs were also contained by using medium to long-term concessionary credit lines. When these concessionary term borrowings are considered, the CASA ratio further improved to 29.86% and the loans to deposit ratio improved to 89.02% as at 31 March 2023.

Equity and Compliance with Capital Requirements

DFCC Bank’s total equity increased to LKR 57 Bn as at 31 March 2023 with the recorded profit after tax of LKR 1.75 Bn. The favourable movements in the equity portfolio and fixed income security portfolio classified as fair value through other comprehensive income and positive movement in hedging reserve also resulted in an increase of the Bank’s total equity.

As at 31 March 2023, the Bank Recorded Tier 1 and Total Capital ratios of 10.171% and 12.848%, respectively. The Bank’s Net Stable Funding Ratio (NSFR) was 128.24%, and Liquidity Coverage Ratio (LCR) – all currency was 226.43% as at 31 March 2023. All these ratios were maintained above the minimum regulatory requirement.

CEO’s Statement

“As we reflect on the last quarter’s performance, we are pleased to report strong financials across all business areas. Sri Lanka’s resilient and adaptable economy and our commitment to innovation, operational excellence, and customer-centricity continue to pay off, as evidenced by our steady revenue growth and increased profitability. We are confident that our robust growth strategy and prudent risk management practices will enable us to continue delivering sustainable value to our stakeholders in the long term, which bodes well for the overall economic situation of Sri Lanka.”



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Canada Day celebration highlights deepening Sri Lanka-Canada business ties

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H.C. Isabelle Martin

The vibrant celebration of Canada’s 159th National Day in Colombo brought together diplomats, government representatives, leading business executives and members of the Sri Lankan and Canadian communities, highlighting the growing strength of bilateral economic and commercial relations between Sri Lanka and Canada.

Hosted by the Canada Sri Lanka Business Convention (CanCham Sri Lanka), the event attracted one of the largest gatherings in its history, providing an important platform for business networking while celebrating the enduring friendship between the two countries.

Addressing the gathering, High Commissioner for Canada in Sri Lanka and the Maldives Isabelle Martin said Canada and Sri Lanka continue to enjoy a warm and expanding partnership built on shared values, people-to-people links, trade, investment and development cooperation.

“Canada Day is an opportunity not only to celebrate our country but also to celebrate the strong friendships and partnerships we have built with Sri Lanka.

The remarkable turnout this evening reflects the strength of those relationships and the growing collaboration between our two nations,” Martin said.

She noted that the close engagement between Canadian and Sri Lankan businesses continues to create new opportunities in trade, innovation, education, sustainable development and investment.

CanCham Sri Lanka officials said this year’s celebration was among the most successful Canada Day events ever organised by the Chamber, drawing an outstanding crowd and creating exceptional opportunities for business networking.

“What an incredible celebration of Canada Day. This was truly one of the most successful Canada Day celebrations in history, with an outstanding crowd and exceptional networking opportunities. It was wonderful to see so many distinguished guests, business leaders and community members come together,” the organisers said.

They thanked sponsors, partners, supporters and volunteers whose dedication ensured the success of the event.

The evening showcased Canada’s multicultural heritage while reaffirming the Chamber’s commitment to promoting stronger commercial links between Sri Lanka and Canada.

Guests representing a wide cross-section of industries exchanged ideas on expanding trade, investment and innovation partnerships.

Canada remains an important economic partner for Sri Lanka, with bilateral trade spanning apparel, agriculture, seafood, ICT services, education and professional services.

Canadian companies continue to explore opportunities in renewable energy, infrastructure, technology and sustainable development, while Sri Lankan exporters maintain a significant presence in the Canadian market.

Business leaders attending the celebration expressed confidence that closer collaboration between the two countries would further strengthen economic resilience and create new opportunities for investment, entrepreneurship and knowledge sharing.

The event concluded on a celebratory note, reaffirming the longstanding friendship between Canada and Sri Lanka and the shared commitment to fostering stronger business and people-to-people ties in the years ahead.

By Ifham Nizam

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Tokyo Cement inspires future-ready construction at BUILD BEYOND 2026 Technology Summit

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Senior Professor Priyan Mendis from the University of Melbourne, speaking at the ‘Build Beyond 2026 Summit

Tokyo Cement hosted ‘Build Beyond 2026 Summit’, a premier knowledge-sharing conference that brought together leading academics, civil and structural engineering experts and professionals of the Sri Lankan construction industry. The event featured keynote addresses by renowned construction technology specialists, Professor Shashank Bishnoi from the Indian Institute of Technology (IIT) Delhi-Abu Dhabi, and Senior Professor Priyan Mendis from the University of Melbourne.

The summit marked the second edition of the Build Beyond Engineering Technology Summit organized by the Tokyo Cement Group, designed to foster collaboration between academia and industry while highlighting global trends, innovations, and emerging technologies in cement and concrete. This year’s discussions focused on advancements in material science that are driving more sustainable and cost-efficient construction practices.

The event drew participation from state-sector authorities, research institutions, academia, engineering students, and public and private sector organizations, creating a dynamic platform for engagement across the construction industry. A key feature of the summit was a high-level panel discussion on “Building a Resilient and Sustainable Construction Future,” featuring several distinguished industry leaders.

The panel included Eng. Nissanka Wijerathne, the Secretary General/CEO of the Chamber of Construction Industry Sri Lanka (CCI), Founder and Deputy Chairman of Civil & Structural Engineering Consultants (Pvt.) Ltd.; Eng. Shiromal Fernando, the Chairman of CTBUH Sri Lanka and Vice President of the Green Building Council Sri Lanka, Adjunct Senior Lecturer at the General Sir John Kotelawala Defense University and visiting lecturer at the University of Moratuwa; Eng.

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ComBank and Carmart join forces to make Peugeot and Leapmotor vehicles more accessible

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Kapila Liyanage, Assistant General Manager – Personal Banking and Retail Products at Commercial Bank and Senake Amerasinghe, Managing Director of Carmart (Pvt) Ltd. exchange the agreement in the presence of representatives of the two companies.

Strengthening its commitment to making vehicle ownership more accessible and affordable, Commercial Bank of Ceylon has entered into a strategic partnership with Carmart (Pvt) Ltd. to offer specially structured leasing facilities for Peugeot and Leapmotor vehicles.

Formalised through a Memorandum of Understanding (MoU), the collaboration brings together the Bank’s expertise in flexible financing and Carmart’s portfolio of internationally recognised vehicle brands, creating a value-rich proposition for customers seeking to purchase new vehicles.

Under this MoU, valid until 30th June 2027, Commercial Bank will offer attractive interest rates, concessions on documentation charges, and a complimentary credit card with the first year’s annual fee waived. These benefits are designed to reduce upfront costs and ease the financial commitment associated with vehicle ownership.

With leasing facilities available through Commercial Bank’s island-wide branch network, a cross section of customers will be able to part-finance their vehicle purchases while structuring repayments to align with their income patterns, enabling greater financial flexibility.

Further enhancing the value proposition, Carmart (Pvt) Ltd. will offer customers a range of added benefits, including a complimentary full tank of fuel, free vehicle registration, and other exclusive privileges, making the overall vehicle ownership experience more rewarding.

The Bank said the partnership reflects its continued focus on delivering practical and customer-centric leasing solutions in collaboration with reputed vendors. By combining competitive rates with cost-saving concessions, the Bank aims to make vehicle ownership more attainable for both existing and new customers.

This collaboration is particularly significant in the current market context, as it offers customers the opportunity to benefit from preferential leasing terms while managing repayments in a way that suits their financial circumstances.

As a pioneer in leasing solutions, Commercial Bank continues to innovate through strategic alliances that enhance value, broaden choice, and support customers in achieving their lifestyle aspirations.

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