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DFCC Bank forges ahead amidst a challenging environment

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Financial Results for the year ended 31 December 2021

DFCC Group recorded a PAT of LKR 3.7 Bn.

Advances grew by LKR 64 Bn to LKR 366 Bn (21% growth)

Deposits grew by LKR 10 Bn to LKR 320 Bn (3% growth)

The DFCC Group comprises of DFCC Bank PLC (DFCC), and its subsidiaries – Lanka Industrial Estates Limited (LINDEL), DFCC Consulting (Pvt) Limited (DCPL) and Synapsys Limited (SL), the joint venture company – Acuity Partners (Pvt) Limited (APL) and associate company – National Asset Management Limited (NAMAL).

DFCC Bank PLC, the largest entity within the Group, reported a profit before tax (PBT) of LKR 4,326Mn and a profit after tax (PAT) of LKR 3,222 Mn for the year ended 31 December 2021. This compares with a PBT of LKR 3,398 Mn and a PAT of LKR 2,388 Mn in the year prior.

The Group recorded a PBT of LKR 4,859 Mn and a PAT of LKR 3,665Mn for the year ended 31 December 2021, compared with LKR 3,944 Mn and LKR 2,847 Mn, respectively, in 2020. All the member entities of the Group made positive contributions to this performance.

The basic earnings per ordinary share (EPS) of the Bank improved to LKR 10.14 for the year ended 31 December 2021 from LKR 7.83 for the comparative year 2020, recording an increase of 29%.

The Bank’s Return on Equity (ROE) improved to 6.55% during the year ended 31 December 2021 from 4.93% recorded for the year ended 31 December 2020. The Bank’s Return on Assets (ROA) before tax for the year ended 31 December 2021 is 0.91%, against a figure of0.78% for the year ended 31 December 2020.

Net Interest Income

The Bank recorded LKR 12,653 Mn in net interest income (NII), which is a 15% increase year on year. This contributed to an increase in interest margin from 2.53% in December 2020 to 2.66% in December 2021.

Other Operating Income

Due to travel restrictions imposed during the year to curb the spread of the pandemic, business momentum was noticeably negatively affected.

The Bank staff at Head office and across branch network working continuously over the year has helped the Bank to increase non-funded business. This effort was fruitful as it resulted in an increase in net fee and commission income to LKR 2,596 Mn for the year ended 31 December 2021, up from LKR 2,061 Mn in the comparative year. Other operating income has increased mainly due to increases in dividend income and gains on the sale of fixed income securities during the year ended 31 December 2021.

Impairment Charge on Loans and Other Losses

Impairment provisions for the year ended 31December 2021 was LKR 4,485 Mn compared to LKR 3,298 Mn in the year prior. The NPL ratio increased from 5.56% in December 2020 to 5.60% in December 2021. In order to address the current and potential future impacts of Covid-19 and other prevailing economic conditions on the lending portfolio, the bank has made adequate impairment provisions, as at 31 December 2021, by introducing changes to internal models to cover unseen risk factors in the present highly uncertain and volatile environment, including additional provisions made for the Bank’s exposure to risk elevated sectors.

Operating Expenses

The Bank’s operating expenses increased from LKR 7,387 million during the year prior to LKR 8,381 million during the year under review, primarily due to increases in transport costs, as result of special transport facilities provided to staff due to covid restrictions and non-availability of public transport, along with all other additional expenses incurred in keeping and maintaining a safe and healthy environment within the Bank’s premises, to support client engagements and servicing. During the year, the Bank also created multiple channels to enhance service delivery to customers through a strong digital drive, providing access to uninterrupted banking services during difficult times. This resulted in an increase in IT related expenses in order to support the infrastructure upgrades. However, the numerous process automation and workflow management systems introduced during the year under review helped to facilitate effective cost controls, which resulted in operating expenses being curtailed and managed at these levels.

Other Comprehensive Income

Investments in equity securities and treasury bills and bonds (fixed income securities) are classified as financial assets and their change in fair value is recorded through other comprehensive income. Accordingly, a fair value loss of LKR 36Mn and a net fair value loss of LKR 2,469Mn were recorded on account of equity and fixed income securities, outstanding as at 31 December 2021 respectively. Unfavourable movements in Treasury bill and bond yields resulted in the fair value loss of LKR 4,532 Mn during the year. A gain of LKR 2,062 Mn was recycled through the Income statement by disposing of selected Treasury bill and bond holdings, originally categorized under fair value through other comprehensive income (FVOCI), with the objective of cash flow management to support loans and advance growth in line with projections. The action also goes in tandem with the bank’s expectations with regard to the domestic interest rate trend, going forward.

Business Growth

Despite the challenging business environment, the Bank continued its growth strategy by increasing both its deposit and loan portfolios during the year ended 31 December 2021. The loan portfolio grew by LKR 63,991 Mn to record LKR 365,901 Mn compared to LKR 301,909 Mn as at 31 December 2020, recording an increase of 21%. The Bank’s deposit base also experienced a growth of 3%, recording an increase of LKR 9,834 Mn to LKR 319,861 Mn from LKR 310,027 Mn as at 31 December 2020. This resulted in recording a loan to deposit ratio of 114%. Further CASA ratio improved to 31.25% as at 31 December 2021. Funding costs of the Bank 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 36.47% as at 31 December 2021.

DFCC Bank continued its approach to tap local and foreign currency related long to medium- term borrowing opportunities to facilitate lending to deserving segments of the market whilst maintaining a high-quality portfolio.

Equity and Compliance with Capital Requirements

In order to support future growth as a full-service retail bank, the Bank has consistently maintained a capital ratio above the Basel III minimum capital requirements. As at 31 December 2021, the Bank has recorded Tier 1 and total capital adequacy ratios of 9.31% and 13.03%, respectively which is comfortably above the minimum regulatory requirements of 8% and 12% including capital conservation buffer of 2%. The Bank’s Net Stable Funding Ratio was 122.43%, which is well above the regulatory minimum of 100%.

CEO Comment

“Ensuring that we run our business responsibly, delivering profit with purpose, DFCC Bank will always place our customers at the forefront of everything we do. As a customer centric, digitally enabled bank, we will continue to be a source of stability to our customers and deliver value through an unmatched, top-of-the-line customer experience.

In line with our stated vision, the Bank embarked upon implementing a state of the art, core banking system which went live in October 2021. Considering the magnitude and complexity of the implementation, we have had to face some unforeseen challenge and I take this opportunity to express our sincere thanks and gratitude to all our clients, who have been understanding and patient with us this year, as we continuously strive to ensure a more futuristic, digitally-enabled system for our clients.

Despite the unprecedented challenges faced due to the ongoing pandemic, staff of DFCC Bank have and will continue to work with commitment to combat the negative socio-economic effects that have impacted our customers and assist them through tailor made financial solutions. We will continue to introduce banking services that put safety and security at the forefront and ensure that our internal processes are aligned with these same principles to serve our customers better.

We have a strong asset base to be deployed, but nothing is more important than the loyalty we earn from customers, not just by keeping their money and their data safe, but by offering products and services that meet their financial needs and requirements. This loyalty generates both more predictable returns and keen insights, enabling us to continuously improve our services and exceed customer expectations.”



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Environmental devastation seen as precipitating economic crisis in Northern Sri Lanka

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Environmentalists and officials on an on-sight tour in Sri Lanka’s North.

As parched soil cracks underfoot and once-thriving fields lie fallow, the farmers of Mannar are living on the frontlines of a crisis that is no longer just environmental — it’s economic. Climate change has tightened its grip on this northern region, and with each failed monsoon and dwindling harvest, the livelihoods of entire communities are evaporating.

The Centre for Environmental Justice (CEJ), along with local stakeholders, has raised urgent concerns over the increasingly hostile conditions faced by farmers in the region. At the heart of the problem are erratic weather patterns — prolonged droughts, unpredictable rainfall, and extreme heat — all of which disrupt the delicate balance required for traditional farming practices.

“The erratic weather patterns triggered by climate change are not only drying up water sources but also pushing already vulnerable farming communities deeper into poverty, Dilena Pathragoda, Executive Director, CEJ told The Island Financial Review.

He added: “The economic consequences are severe — from crop failures to loss of livelihoods — and without timely interventions and climate-resilient strategies, the long-term sustainability of agriculture in regions like Mannar is in jeopardy.”

In 2024 alone, nearly 3,000 acres of paddy land in Mannar District were left uncultivated due to lack of water, according to data from local agrarian offices.

In other words, this represents an estimated loss of over Rs. 225 million in potential harvest income, based on average yields and market prices. Farmers who once cultivated rice, onions and vegetables with predictable seasonal success now face devastating uncertainty.

The failure of rain-fed tanks (reservoirs) and the drying up of canals have made irrigation nearly impossible in some areas. In Nanattan and Musali divisions, water availability dropped by some 60 per cent compared to historical averages. As water becomes scarcer, so do incomes, leading many families to take on debt or abandon agriculture altogether in search of daily-wage labour.

This agricultural downturn is having ripple effects throughout the local economy. In Mannar, where over 60% of households depend directly or indirectly on farming, the collapse of agricultural productivity has led to rising food prices, shrinking local markets, and reduced cash flow for small businesses. Fertilizer vendors, seed suppliers and even transport workers are reporting significant losses.

“Some farmers have seen their seasonal incomes drop from Rs. 200,000 to under Rs. 50,000, noted one local agriculture officer. “Many are defaulting on informal loans and are now relying on relief aid to survive.”

Economists warn that this trend, if unchecked, could contribute to broader socio-economic instability. Rural depopulation, youth migration, and heightened inequality are already being observed in vulnerable districts. Women, in particular, face added burdens as household food security becomes more precarious and access to clean water requires greater physical labor.

Despite these challenges, experts insist that solutions are within reach. Climate-resilient farming techniques — such as drip irrigation, drought-tolerant crops, and community-managed water systems — have shown promise in pilot projects across other dry zones. However, scaling these up requires political will, coordinated planning, and substantial investment.

Environmental advocates also call for a shift in national agricultural policy. “Rather than pouring money into outdated infrastructure or monoculture subsidies, Sri Lanka must pivot towards sustainable, adaptive farming models, said Pathragoda. “This includes better support for farmers’ education, access to technology, and integrated land and water management.”

Civil society groups, including CEJ, are urging both the government and international donors to treat the Mannar crisis as a wake-up call. Climate finance mechanisms, they argue, must be made accessible to grassroots communities, not just large-scale development firms. Moreover, climate justice must take center stage — recognizing that those suffering most have contributed least to the global emissions causing these disruptions.

As Sri Lanka navigates an uncertain economic recovery, ensuring food security and rural resilience is more than an environmental imperative — it’s a matter of national stability, Pathragoda stressed.

By Ifham Nizam

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CSE and NCE partner to empower Sri Lankan exporters

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The Colombo Stock Exchange (CSE) and the National Chamber of Exporters of Sri Lanka (NCE) entered into a strategic partnership to support Sri Lankan exporters by enhancing their access to capital market opportunities and broadening visibility for their businesses.

The partnership agreement was signed by Shiham Marikar, Secretary General / CEO, The National Chamber of Exporters of Sri Lanka, and Ms. Vindhya Jayasekera, Chief Executive Officer Designate, CSE. The signing ceremony was attended by Ms. Dilini Gamlathge, Assistant Director, Member Services/Operations, The National Chamber of Exporters of Sri Lanka; Ms. Punyamali Saparamadu, SVP Commercial, CSE; Ms. Himashi Wickramasinghe, Manager, Commercial, CSE; Ms. Shivandini Liyanage, SVP, Legal, Enforcement and Compliance, CSE; and Kanishka Gunawardana, Manager, Enforcement and Compliance, CSE.

This partnership with the CSE will provide NCE members—both experienced exporters and aspiring ones—with access to vital capital market knowledge and services to support their business expansion efforts.

This collaboration aims to offer exporters tools and resources to strengthen their market presence and growth potential. It also creates a platform for SMEs within the export sector to consider listing on the Colombo Stock Exchange, particularly through the Empower Board—dedicated to facilitating capital raising for small and medium-sized businesses.

Through this partnership, CSE will also gain direct access to a network of established exporters, enhancing the reach of capital market education, awareness-building, and strategic financing solutions among key players in Sri Lanka’s export economy.

The collaboration will further enable opportunities for joint forums, knowledge-sharing sessions, and networking events, providing exporters with guidance on alternative avenues for capital generation and highlighting the benefits of corporate good governance and transparency through listing.

This partnership adds credibility to the CSE and NCE’s shared efforts and signals trustworthiness to potential stakeholders, offering significant advantages for fostering growth, strategic opportunities, and long-term development within Sri Lanka’s export sector.

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A case for a visa-free tourism regime in SL

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Nihal Perera: “Visa-free travel needed.”

Sri Lanka should not have any restrictions for tourist arrivals and a visa-free regime is the need of the hour to woo more visitors, said travel and aviation expert Nihal C.B. Perera.

The founder of a family-owned company in Sri Lanka, Sparklink Travels, Perera said that Sri Lanka should offer the same ‘Visa Free facility’ initiated by Singapore and now successfully implemented by Thailand.

A former Ceylon Tourist Board, Development and Publicity Director, he said that during his time, they leased or gave several unused state land areas to build hotels. “But we told the investors that the construction has to start in six months, and this happened.”

One such venture was the opening of the Pegasus Reef Hotel at Wattala.

Perera also initiated the creation of special tourism zones in Bentota, Hikkaduwa and several other areas.

After a nearly 15-year stint at the Tourist Board, he formed his own travel company, Sparklink Travels, in 1979 with just 4 employees. “With the rapid expansion of business, and being recognized as an IATA-accredited travel agency, we increased our employee strength and moved into our own four-storey building in Bambalapitiya. We also opened a branch in Australia, he said.

“After the COVID pandemic, we also negotiated with airlines and refunded all passenger tickets purchased and cancelled due to COVID-19, Perera explained.

He recalled the days when people were issued small booklet-type air tickets and how his staff had to visit the airline offices to collect them. Perera added: “The online has changed these and I think this is a time-saving move.

“Unlike two decades ago, online and payment gateways have enabled people to book their own air tickets from home and we too have changed our strategies to find new businesses.”

Today, Sparklink Travels continues with his son Praki Perera, heading the company’s operations in Sri Lanka and Australia.

Their dedication ensures that the company remains a premier provider of air travel, cruises and tours, with professional services tailored to enhance the true essence of travel.

Perera, who has been a pioneering force in Sri Lanka’s tourism sector, was also honored as a ‘Tourism Legend’ at the annual industry awards.

By Hiran H. Senewiratne

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