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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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SL’s hard default status impacts CSE negatively

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By Hiran H. Senewiratne

The CSE slipped in the first hour of trading yesterday after opening over 2.0 per cent up due to SJB lawmaker Dr Harsha de Silva informing that Sri Lanka has now become a hard default country with the failure to pay loans raised from other countries, stock market analysts said.

Sri Lanka’s impending default on US $12.6 billion of overseas bonds is flashing a warning sign to investors in other developing nations. Besides surging inflation is set to take a painful toll. The current petrol crisis has driven the CSE to negative territory, analysts said.

Following the previous day’s momentum, the market opened the day gaining over 2.28 per cent or 192.88 points. Amid those developments, the All- Share Price Index slipped 0.39 per cent or 40.44 points and S and P SL20 went down by 7.76 points. Turnover stood at Rs 3.5 billion without a crossing.

In the retail market top seven companies that mainly contributed to the turnover were; Expolanka Holdings Rs 1.1 billion (8.86 million shares traded), Browns Investments Rs 585 million (66.7 million shares traded), LOLC Finance Rs 527 million (49.5 million shares traded), Softlogic Life Insurance Rs 169 million (2.3 million shares traded), Softlogic Holdings Rs 145 million (16.3 million shares traded), LOLC Holdings Rs 116 million (210,000 shares traded) and Lanka IOC Rs 87.1 million (21 million shares traded). During the day 268 million share volumes changed hands in 33659 transactions.

The country’s manufacturing and services sectors suffered a sharp dip in April as per the Purchasing Managers Index (PMI) compiled by the Central Bank.

The manufacturing PMI decreased by 21.4 points as against March whilst the Services PMI was down by 7.5 points. CBSL said the Manufacturing PMI declined significantly in April 2022, following the seasonal pattern and indicating a contraction in manufacturing activities on a month-on-month basis. This would impact the manufacturing and services sector counters in the stock market, analysts said

Sri Lanka’s commercial banks quoted Rs 364 for the dollar against telegraphic transfers yesterday while the Central Bank set a daily guidance rate for interbank spot trade for Rs 359.65 plus or minus Rs 2.50.

Banks could quote Rs 2.50 plus or minus under the new direction and the rate is set below the market rates. The kerb rate has also eased after spiking last week.

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ComBank’s ‘Anagi’ partners with insurance companies to offer affordable insurance to female customers

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The Commercial Bank of Ceylon has announced it has partnered with several insurance companies to offer special Life and General insurance products with unmatched low premium rates exclusively for women customers, under the Bank’s ‘Anagi Women’s Banking’ portfolio.

Extending the scope of the Bank’s services to support this segment, the insurance cover comprises of Life insurance, Business insurance, and Home insurance options, the Bank said.

Besides the special premium rates that apply, the insurance can be obtained via an extremely simplified process, and can be extended to the spouses of women customers. The Bank said the scheme is expected to promote financial inclusion, one of the primary objectives of the Anagi Women’s Banking portfolio, through insurance protection.

The policy value of the Life insurance cover provided under this scheme ranges from Rs 1 million to Rs 5 million and covers eventualities of ‘natural and accidental death’ of the life assured during the policy period.

Under this Life insurance facility, a female customer of Commercial Bank between the age of 18 and 45 can sign up for a Rs 1 million policy by just paying an annual premium of Rs 1,100. The spouse can obtain the same policy for Rs 1,500. Women between ages 46 and 65 can opt for the same sum assured with an annual premium of Rs 2,200, if the policy is taken for themselves, or Rs 2,750, if the policy is taken to cover the spouse. The cover can be purchased at multiples of the unit rates of Rs 1,100 or Rs 2,200.

Quoting the 2020 report of the Insurance Regulatory Commission of Sri Lanka (IRCSL), the Bank said these are incredibly affordable life insurance policies for women, considering that the average sum assured in Sri Lanka is only Rs 1.4 million for which long term insurance policyholders pay an average annual premium of Rs 28,655.

Commercial Bank’s female customers who become life insurance policyholders under this scheme are also entitled to value added services such as access to free fitness classes conducted by leading online fitness provider Fitzky, and a 15% discount on consultations at any ‘My Dentist’ clinic, the largest dental clinic chain in Sri Lanka.

In addition to the life cover, business women can also benefit from a Business Insurance under ‘Anagi.’ It offers protection against fire or lightning, explosions, malicious or aircraft damages, a series of natural disasters, burglary, acts of terrorism and commotions among other incidents. The policy covers losses to buildings including permanent fixtures, fittings, machinery, stocks, cash, and personal property of the policyholder and the cost of workmen’s compensation, hospitalisation, loss of rent, removal of debris, architect’s, surveyor’s, and engineer’s fees due to damage or accidents, and damage to service lines, to name a few. It also includes Personal Accident cover for employers and employees in the event of death or permanent disability, as well as legal liability cover.

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LOLC General Insurance named Best General Insurance Company of the Year

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Ushan Goonawardane, Chief Strategy Manager, LOLC General Insurance accepting the award in Kolkata, India from Sudhin Roy Chowdhury, a Jury Member.

The 3rd Emerging Asia Insurance Awards 2021, recognized LOLC General Insurance PLC as the ‘Best General Insurance Company of the Year’ amongst the top Insurance companies nominated from South-East Asia. The evaluations were done by PricewaterhouseCoopers (PwC), the multinational professional service network and the event was held ceremonially on the 30th of April 2022 in Kolkata, India.

The Indian Chamber of Commerce (ICC) initiated the Emerging Asia Insurance Awards to acknowledge, honour and to recognise the efforts made by the emerging Asian Insurance companies while creating a platform for them to discuss their common challenges and its ramifications effecting the Insurance sector.

PwC performed the groundwork for the awarding body in reviewing and assessing the applicant profiles. The selection of awards comprised of several criteria and PwC has evaluated the audited financial data (for the last three financial years) of the applicants. Performance on Technical Reserve to Net Premium Ratio, Combined Ratio, Top Line Growth, Shareholder Capital, Number of complaints received, Claim Settlement Ratio and Investment on Training were assessed in gauging the winners.

LOLC General Insurance PLC is a subsidiary of LOLC Holdings PLC, which is one of Sri Lanka’s largest and most diversified conglomerates with operations in 20 countries in Asia and Africa. LOLC General Insurance PLC is currently one of the fastest growing Insurance companies in Sri Lanka and owns 45% of Serendib Micro Insurance PLC in Cambodia. The company has evolved into one of the country’s leading insurance providers of today, in a relatively short period of time.

During the last few years the company continuously streamlined their processes and achieved greater coordination between different units of the company to implement a customer centric approach. The organisation is committed to continuously improve its overall processes, efficiency and relationships to serve the customers better.

During 2021, LOLC General Insurance recorded a premium income growth of 19.2% which was the highest growth recorded by a mid/large sized company in the General Insurance industry and reported paid claims to the tune of Rs. 2.5 billion. LOLC General Insurance has always maintained an undisputed and unsurpassed reputation for speedy settlement of claims. The amount of money provided in lieu of claim reimbursements during the last financial year itself, reflects the company’s commitment to timely claim settlements.

Commenting on the remarkable achievement Chief Executive Officer of LOLC General Insurance, Mr. Kithsiri Gunawardena said “It’s indeed an honour to be adjudged by PwC as the Best General Insurance Company of the Year at the Emerging Asia Insurance Awards 2021 organized by the Indian Chamber of Commerce. Winning the award among Pan-Asian giants this year is all the more precious to us due to all the challenges faced globally as well as within our island nation. I wish to take this opportunity to thank our untiring staff who are key in the success of the organisation and of course our invaluable customers who we strive to give the best service at all times. We will continue to provide innovative risk solutions and create value to our customers, employees and stakeholders!”

LOLC General Insurance aims to help the customers understand and to manage the risks they face, be it individual, family or business. The company works hard to offer the customers a range of products and services coupled with expert support. The solutions assure protection against numerous risks and support all classes of products in the General Insurance space. The organization is supported by Swiss Re, one of the largest reinsurers in the world.

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