August, 14, 2026
DFCC Bank entered the second half of 2026 with a larger and increasingly diversified franchise, following sustained growth across lending, deposits, fee income, and total assets during the first six months of the year. Loan and deposit portfolios grew by 9% and 12%, respectively, compared to 31 December 2025, while total assets increased by 7% to LKR 919 Bn and total liabilities grew by 8% to LKR 811 Bn. Net fee and commission income rose by 29%, while Net Interest Income increased by 6% to LKR 16 Bn, demonstrating continued momentum across the Bank's core income streams.
The first half unfolded against a more demanding external environment. Heightened geopolitical tensions in the Middle East kept commodity prices, particularly energy prices, elevated and increased uncertainty across global markets. In response to inflationary risks, the Central Bank of Sri Lanka increased the Overnight Policy Rate (OPR) by 100 basis points to 8.75% in May 2026. Together with other policy measures, the tightening and its gradual transmission to the real economy are expected to moderate credit growth and demand pressures in the period ahead.
Against this backdrop, the Bank continued to manage its funding profile and margins with discipline. Deposit and lending rates were revised in line with prevailing market conditions, while prudent liquidity management, funding optimisation initiatives, and effective control of funding costs supported a 6% increase in Net Interest Income to LKR 16 Bn. These measures helped preserve balance sheet resilience while supporting sustainable value creation for customers and shareholders.
The Bank recorded a Profit After Tax of LKR 3.9 Bn from core operations. While profitability was lower than in the corresponding period, underlying business momentum remained resilient as management deliberately strengthened prudential buffers in response to evolving geopolitical and macroeconomic risks. Impairment provisioning was reinforced through refinements to credit risk models and specific management overlays, resulting in an LKR 1.1 Bn increase in impairment charges compared to the same period last year. At the same time, the Bank maintained a selective lending approach and strict cost discipline. Notably, the net stage 3 impaired loan ratio improved to 3.61% from 4.55% as at 31 December 2025, reinforcing the Bank's focus on asset quality and sustainable growth.
A defining strategic development following the reporting period was the completion of DFCC Bank's acquisition of Standard Chartered Bank PLC's Wealth and Retail Banking Business in Sri Lanka. First announced to the Colombo Stock Exchange in November 2025, the transaction was completed with the acquired portfolio integrated into DFCC Bank effective 1 August 2026.
The acquisition encompasses approximately 50,000 customer accounts and around 260 employees, while expanding DFCC Bank's network to 139 locations across the country. Together, these additions materially strengthen the Bank's retail and wealth management capabilities, reach, and accessibility.
The transaction represents a significant step in DFCC Bank's growth journey, providing a broader platform for sustainable expansion, deeper customer relationships, and enhanced service delivery while creating long-term value for customers, employees, and shareholders.
Beyond financial performance, 1H 2026 also brought further validation of DFCC Bank's customer, sustainability, and community agenda. The Bank's pioneering Blue Bond secured supplementary listings on the Luxembourg Stock Exchange's Luxembourg Green Exchange and India INX at GIFT City, and was recognised at the Environmental Finance Sustainable Debt Awards 2026. DFCC Bank also received a Gold Award for Financial Inclusivity and a Merit Award for Customer Convenience at the LankaPay Technovation Awards 2026. Through Ride for Life and Ride for Her, the Bank continued to extend its community engagement across mental wellbeing and women's empowerment.
This commentary relates to the unaudited financial statements for the period ended 30 June 2026, presented in accordance with Sri Lanka Accounting Standard 34 (LKAS 34) on Interim Financial Statements.
INCOME STATEMENT ANALYSIS
PROFITABILITY
DFCC Bank PLC, the largest entity within the Group, reported a Profit Before Tax (PBT) of LKR 5,480 Mn and a Profit After Tax (PAT) of LKR 3,904 Mn from core operations for the period ended 30 June 2026, compared to a PBT of LKR 7,910 Mn and a PAT of LKR 5,555 Mn in the corresponding period.
At Group level, for the period ended 30 June 2026, PBT was LKR 5,801 Mn and PAT was LKR 4,139 Mn, compared to LKR 8,172 Mn and LKR 5,747 Mn, respectively, in 2025. The Bank’s Earnings Per Share (EPS) from core banking operations was LKR 8.76 for the period ended 30 June 2026.
The Bank’s Return on Assets (ROA) before tax was 0.99%, while Return on Equity (ROE) after tax stood at 6.19% for the period ended 30 June 2026.
The Bank’s total tax expense, including Value Added Tax (VAT) on financial services, Social Security Contribution Levy (SSCL) on financial services, and Income Tax, amounted to LKR 3,696 Mn for the period ended 30 June 2026. Consequently, the Bank’s tax expense as a percentage of operating profit stood at 49% for the period.
NET INTEREST INCOME
With monetary policy tightening and its gradual transmission to the real economy expected to moderate credit growth and demand pressures, the Bank revised both deposit and lending rates upward during the period in line with prevailing market conditions. Consequently, net interest income increased by 6% to LKR 16,132 Mn, supported by disciplined margin management, effective balance sheet optimisation, and continued growth in earning assets. The Bank’s asset base expanded by 17% over the past 12 months, while the loan portfolio recorded a strong 20% growth, reflecting a strategic focus on quality asset expansion and sustainable business growth.
The Bank also strengthened its funding profile, with the CASA portfolio increasing by 14% from 31 December 2025 and the CASA ratio improving to 24.99% as at 30 June 2026. Despite a competitive interest rate environment and prevailing market dynamics, the Bank maintained a healthy Net Interest Margin of 3.66%, underscoring its prudent funding and pricing strategies.
FEE AND COMMISSION INCOME
Strategic focus on trade-related commissions and card-based services supported strong growth in fee-based income, with the credit card portfolio expansion contributing significantly to overall performance.
While related fee expenses increased in line with customer acquisition and portfolio growth, the net impact remained positive. Net fee and commission income increased by 29% to LKR 4,187 Mn, compared to LKR 3,249 Mn in the corresponding period of 2025.
IMPAIRMENT CHARGE ON LOANS AND OTHER LOSSES
The net stage 3 impaired loan ratio improved to 3.61% as at 30 June 2026, from 4.55% as at 31 December 2025, supported by recoveries and portfolio expansion.
In response to current and potential future impacts of global and domestic economic conditions on the Bank’s lending portfolio, management strengthened impairment provisioning during the period. This was achieved through enhancements to internal expected credit loss models to capture risk factors not fully observable in the current volatile geopolitical and economic environment, including the recognition of additional provisions as management overlays for exposures to higher‑risk sectors and specific customer segments, making additional provision for specific large group exposures.
The Bank also maintained adequate provisioning in line with the accelerated growth in its lending portfolio. As a result, impairment charges increased to LKR 4,630 Mn for the period ended 30 June 2026, compared to LKR 3,482 Mn recorded in the corresponding period of 2025. These provisions have been established to safeguard the Bank’s financial strength and reflect a more conservative assessment of potential credit risks, considering prevailing macroeconomic conditions and the potential impact of the geopolitical environment.
OPERATING EXPENSES
Technology and digital transformation continued to be key strategic priorities for the Bank during the period, supported by ongoing investments in IT infrastructure aimed at enhancing digital capabilities, strengthening information security, improving operational efficiency, and delivering a seamless multi-channel customer experience. The Bank also increased its investment in marketing
and business development initiatives to strengthen brand visibility, deepen customer engagement, and support growth across key product segments. These investments are expected to create long-term value by reinforcing the Bank’s market position, expanding its customer franchise, and enhancing its competitive advantage in an evolving financial services landscape.
In addition, operating expenses were impacted by annual salary revisions and performance-based incentive payments, reflecting the Bank’s continued focus on attracting, retaining, and rewarding talent while supporting its long-term growth objectives.
As a result of these strategic investments and personnel-related costs, total operating expenses for the six-month period ended 30 June 2026 increased to LKR 10,969 Mn from LKR 8,325 Mn recorded in the corresponding period of 2025. Nevertheless, the Bank remains committed to maintaining prudent cost discipline and pursuing ongoing efficiency improvements to support sustainable growth and operational resilience.
OTHER COMPREHENSIVE INCOME (OCI)
Changes in the fair value of investments in equity 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 profitability.
A fair value gain of LKR 1,144 Mn was recorded on equity investments outstanding as at 30 June 2026, primarily driven by the increase in the share price of Commercial Bank of Ceylon PLC.
FINANCIAL POSITION ANALYSIS
ASSETS
Total assets increased by LKR 62 Bn, representing a 7% growth since December 2025, mainly attributable to the expansion of the loan portfolio, which rose by LKR 48 Bn to LKR 564 Bn, a 9% increase from LKR 516 Bn as at 31 December 2025. This performance demonstrates the successful delivery of DFCC Bank’s strategic growth initiatives, driven by a selective and disciplined lending approach that balances sustainable expansion with asset quality. The renewed confidence amid improving economic conditions reinforces the Bank’s role in driving prudent credit expansion and supporting national economic initiatives.
LIABILITIES
The Bank’s total liabilities increased by LKR 61 Bn, reflecting an 8% growth from December 2025. The deposit base expanded by 12%, rising by LKR 67 Bn to LKR 632 Bn, up from LKR 565 Bn as at 31 December 2025, resulting in a loan-to-deposit ratio of 97.44%. Additionally, the CASA ratio stood at 24.99% as at 30 June 2026.
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 concessionary funding to customers. Factoring in these term borrowings, the CASA ratio further improved to 29.42%, while the loan-to-deposit ratio improved to 91.68% as at 30 June 2026.
EQUITY AND COMPLIANCE WITH CAPITAL REQUIREMENTS
As at 30 June 2026, total equity was maintained at LKR 109 Bn, contributed by a profit after tax of LKR 3.9 Bn and movements across the Bank’s securities portfolios.
In alignment with the Bank’s growth strategy and the improving economic environment, the net loan portfolio grew by 9%. Leveraging the strengthened equity base, the Bank effectively absorbed the additional capital requirements associated with portfolio growth. The Tier 1 Capital Ratio was maintained at 11.947%, while the Total Capital Ratio stood at 15.707%, compared to 13.550% and 15.933%, respectively, as at 31 December 2025.
Following shareholder approval, the Bank is currently in the process of completing the remaining regulatory and administrative formalities relating to the issuance of Basel III-compliant, Tier II, listed, rated, subordinated, unsecured, redeemable debentures, with the objective of raising up to LKR 15 Bn.
The Bank’s Net Stable Funding Ratio (NSFR) stood at 124.43%, and the Liquidity Coverage Ratio (LCR) – all currency – stood at 162.26%, both comfortably exceeding regulatory minimums.
DFCC Bank entered the second half of 2026 from a position of greater scale and a stronger core franchise. For the six months ended 30 June 2026, the Group recorded a Profit After Tax of LKR 4.1 Bn, while loans and deposits expanded by 9% and 12%, respectively, from December 2025. Net fee and commission income increased by 29%, and Net Interest Income grew by 6%, reflecting continued momentum across our core businesses.
Reported profitability was lower than in the corresponding period, but the half-year should be viewed in the context of the deliberate decisions we have taken to protect the quality and resilience of the franchise. We strengthened impairment provisioning through model refinements and management overlays, maintained a selective approach to lending, and continued to exercise cost and liquidity discipline. Importantly, the net stage 3 impaired loan ratio improved to 3.61%, even as we strengthened our prudential buffers. As we continue to pursue sustainable growth, we will capitalise on opportunities with confidence and purpose, underpinned by sound risk judgement and disciplined execution.
Strategically, we have also entered a new phase. Following the reporting period, we completed the acquisition of Standard Chartered Bank PLC's Wealth and Retail Banking business in Sri Lanka, effective 1 August 2026. The transaction brings approximately 50,000 customer accounts and around 260 colleagues into DFCC Bank and expands our network to 139 locations. This is more than an acquisition. It is an opportunity to welcome new customers and colleagues, deepen our retail and wealth proposition, and bring the DFCC Bank experience to a broader community with care, consistency, and trust.
Our capital and sustainability agenda also continued to advance. The successful LKR 10 Bn Basel III-compliant GSS+ Bond issuance earlier in the year strengthened our capital position and reinforced investor confidence. Building on this, our pioneering Blue Bond secured supplementary listings on the Luxembourg Stock Exchange's Luxembourg Green Exchange and India INX at GIFT City, and was recognised at the Environmental Finance Sustainable Debt Awards 2026. These milestones demonstrate the role DFCC Bank can play in connecting Sri Lanka with credible, responsible sources of capital.
Customer centricity remains central to how we judge our progress. Recognition at the LankaPay Technovation Awards 2026, with a Gold Award for Financial Inclusivity and a Merit Award for Customer Convenience, reflects our continued focus on making banking simpler and more accessible. Beyond banking, our Ride for Life platform continued to bring our people, customers, and communities together around causes that matter - advancing mental wellbeing through Ride for Life, women's empowerment through Ride for Her, and biodiversity conservation through Ride for the Rosette. Taking place across multiple locations in Sri Lanka, including areas connected to vulnerable leopard corridors, Ride for the Rosette is helping to build greater awareness of the need to protect the Sri Lankan leopard and the ecosystems on which it depends. As our franchise grows, we also remain committed to the culture and people standards recognised through our Great Place to Work certification and our ranking among the AICPA & CIMA Top 20 Employers.
On behalf of DFCC Bank, I remain grateful to our customers, employees, regulators, shareholders, and partners for the trust placed in us. That trust carries a responsibility to grow with discipline, act with transparency, and keep the customer at the centre of our decisions. As we move through the second half of the year, our focus is clear: integrate our expanded franchise well, protect asset quality, strengthen sustainable income streams, and continue building a Bank that is easier to work with while deepening our contribution to Sri Lanka’s progress.
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