DFCC Bank PLC Annual Report 2016.Pdf
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Going beyond conventional reporting, we have implemented a About this Report more current format for reporting and have upgraded our corporate website with a focus on investor relations, supplemented by an investor relations app for smart phones and other devices. This is an integrated annual report and is a compact Reporting Period disclosure on how our strategy, governance, performance and prospects have resulted in the The DFCC Bank Annual Report for 2016 covers the 12 month period from 01 January 2016 to 31 December 2016 and is reflective of the creation of sustainable value within our operating change in the financial year-end implemented in 2015. The previous environment. annual report covered the nine month period from 01 April 2015 to 31 December 2015 and is available on the company website Value Creation and Capital Formation (www.dfcc.lk). Some of the Group entities have a 31 March financial year-end and they are consolidated with DFCC Bank’s reporting The ability of an organisation to create sustainable value for itself period with a three month time lag. A summary of the accounting depends on the value it creates for its stakeholders, making value periods covered by the Statement of Profit and Loss and Other creation essentially a two-way process. In fact, the more value an Comprehensive Income in the Bank and the Group columns is given organisation creates, the more value it is able to create for itself. in the Financial Report (page 136). Therefore firms spend substantial resources on creating and maintaining relationships with their stakeholders. Value creation leads to capital formation. As a store of value, capital takes on Report Boundary a broader meaning in integrated reporting and constitutes the Our reporting covers DFCC Bank PLC (‘DFCC Bank’ or ‘Bank’) resources and relationships used and affected by an organisation. and the DFCC Bank Group (‘Group’) comprising the Bank and its We classify capital that is owned by the organisation as being subsidiaries, a joint venture company and an associate company. ‘internal’ capital, while capital that is not owned as ‘external’ capital. The respective entities are duly identified where applicable. Ownership is irrelevant here as long as the organisation has access to and uses all forms of its capital to create sustainable value for itself and its stakeholders. Compliance Our Management Discussion and Analysis is thus structured As declared on page 131 the Board of Directors of DFCC Bank, in the likewise, based on value creation and capital formation. spirit of good governance, accepts responsibility for the entirety of this Annual Report 2016. Comprehensive and Yet Concise The information contained herein, as in the past, is in compliance with all applicable laws, regulations and standards. Additional Taking forward the approach to reporting adopted in the last two details are given in the Corporate Governance Report (page 97), years, this report balances the need to communicate effectively Financial Statements and the Notes thereon (page 135) and the through concise, relevant information (to a large and diverse Independent Auditors’ Report (page 134). stakeholder group), while at the same time providing comprehensive compliance-related disclosures (that would interest only a few). In addition, we have drawn on concepts, principles and guidance We are thus presenting our Annual Report 2016 in three from the Global Reporting Initiative (GRI) Sustainability Guidelines primary formats: G4, the International Integrated Reporting Framework and the Smart Integrated Reporting Methodology™ in producing this Report. a concise report (what you are now reading) in print and CD formats which meets compliance requirements while communicating with an audience looking for the essentials in Precautionary Principle a nutshell; We take due cognisance of the social and environmental a comprehensive report for a universal audience in online html consequences of our actions, both direct and indirect. The latter are format [http://dfcc2016.annualreports.lk]; and more significant and they arise from our lending operations, which are addressed through credit policies, the Social & Environmental a condensed ‘annual snapshot’ in print and pdf formats that Management System (SEMS), post-disbursement supervision and communicates across a broad spectrum of current and risk management processes. potential stakeholders. Comparability The basis for reporting on subsidiaries, joint ventures and other entities, leased facilities, outsourced operations as well as any restatements and significant changes from previous reporting periods in the scope, boundary or measurement methods are disclosed where appropriate. They are in compliance with the reporting standards disclosed in the Financial Reports. Queries We welcome your comments or questions on this Report. You may contact the Secretary to the Board at our Head Office via email or snail mail through the contact details given under Corporate Information. Committed to Grow 2015 Merged with 2015 Vardhana Bank Rebranded Incorporated as 2015 DFCC Bank PLC Best Managed Restructured Home Company in Sri Lanka Finance Company (Fiji) 2013 No. 1 in market (Asia Money) capitalisation as a commercial bank 1995 1993 Jointly awarded Telecom 1996 LINDEL privatisation mandate founded 1992 Bond issue of 2013 USD 100 million Funded Sri Lanka’s First loans to 1996 Highest PAT amongst 1992 first grid connected listed companies manufacturing & mini hydropower project pharmaceutical Syndicated loan of 2013 industries USD 45 million LVL founded 1992 Acquired 29% stake First loan to 1997 Commenced 1956 in Commercial Bank operations 1956 food & beverage Public issue of industry Shareholding in LKR 183 million 1991 1957 1955 Issue of Vardhana Bank 2011 1998 USD 65 million increased to 99% Founded under Funded FRN guaranteed NAMAL 1991 Act of Parliament 1967 Sri Lanka’s by ADB founded first beach resort hotel Acuity Partners Arranged largest 2008 Opened first 1988 1977 1998 founded ADFIAP syndicated loan for branch in Kandy founded 1987 1978 Sri Lanka Telecom Set-up dedicated DFCC Consulting Funded Sri Lanka’s Best Managed 2004 SMI department 1999 founded first cellular operator Company of the Decade (Asia Money) 2003 2000 Acquired and re-launched DFCC Vardhana Bank 2002 Managed first rated debenture issue for Managed 2001 Sri Lanka Telecom Sri Lanka Telecom IPO Acquired and re-launched DFCC Stockbrokers The rings of growth symbolise DFCC’s evolution from a sapling to a flourishing tree Vision Mission Our Values “To be the leading financial “To provide innovative and Innovative solutions provider sustainably responsible solutions true to our Customer Centric developing individuals and Values with the expertise of our Professional businesses” multidisciplinary Ethical team of professionals and Accountable synergies of our financial Team Oriented services group” Socially Responsible SCAN to view the online version http://dfcc2016.annualreports.lk Contents 04 78 Highlights Recognition Awards and Accolades – 78 08 Message from the Chairman 79 Stewardship Integrated Risk Management – 79 09 Corporate Governance – 97 Chief Executive’s Review Annual Report of the Board of Directors on the Affairs of the Bank – 108 10 Board Committees – 113 Profiles Directors’ Statement on Internal Control – 122 Board of Directors – 10 Independent Assurance Report – 124 Corporate Management – 14 Management Team – 16 125 22 Investor Business Model Relations About DFCC Bank – 22 Investor Engagement – 125 Our Reach – 23 Performance of the Share – 125 Group Structure – 24 Distribution of Shareholding – 127 Our Portfolio – 26 Operating Environment – 30 Strategic Direction – 32 129 Stakeholders – 34 Materiality – 36 Financial Reports Financial Calendar – 130 37 Statement of Directors’ Responsibilities in Relation Management Discussion to Financial Statements – 131 and Analysis Chief Executive’s and Chief Financial Officer’s Value Creation and Statement of Responsibility – 132 Internal Capital Formation 37 Supplementary Financial Capital – 37 Income Statement – Combined 133 Institutional Capital – 44 Independent Auditors’ Report – 134 Value Creation and Financial Statements and Notes – 135 External Capital Formation 48 Other Disclosures – 221 Investor Capital – 48 Customer Capital – 49 Employee Capital – 59 225 Business Partner Capital – 69 Supplementary Information Social and Value Added Statement – 225 Environmental Capital – 73 Sources and Distribution of Income – 226 Ten Year Summary – 227 Corporate Information – 228 Highlights Operational Set-up the MSME Set-up the Strategic Business Payments and Cash Unit Management Unit to cater to the Small Enterprise sector to focus on driving CASA and Other Income Launched Upgraded eight an internally Sri Lanka Postal developed Complaint Units Management System to fully-fledged branches which enables the real time entry of customer complaints and monitors the rectification process to completion Digitalisation Launched the Upgraded the Vardhana Virtual Lanka Money Wallet (V V W) Transfer (LMT) and extended the service to non- service DFCC Bank customers enabling remittances to be received through the Vardhana Virtual Wallet Adopted Google's Initiated a G Suite cutting-edge Security being the first Bank to move Information Event its entire collaboration platform onto G Suite to facilitate Management System employee communication to monitor ongoing security events from all systems on a single platform Financial Group Based on current SLFRS LKR million Year