Contents About this Report – 02 About DFCC Bank – 03 A Pioneer’s Journey – 04 DFCC Group Structure – 05 Highlights – 06 Leadership 08 Message from the Chairman – 08 Chief Executive’s Review – 10 Board of Directors – 13 Corporate Management – 17 Management Team – 18 20 Business Model Our Value Creation Model – 20 Operating Environment – 22 Strategic Direction and Outlook – 24 Stakeholders – 26 Materiality – 30 Management 32 Discussion and Analysis Financial Capital – 32 Institutional Capital – 46 Investor Capital – 51 Customer Capital – 54 Employee Capital – 63 Business Partner Capital – 68 Social and Environmental Capital – 71 Financial By combining the 145 Reports commercial banking mindset with the Financial Calendar – 146 development banking Statement of Directors’ Responsibilities mindset we have crafted in Relation to Financial Statements – 147 over 65 years, DFCC Chief Executive’s and Chief Financial Bank is well placed to Officer’s Statement of Responsibility – 148 leverage this expertise to build long-lasting Independent Auditors’ Report – 149 relationships that Income Statement – 154 benefit both our customers and our bank. Statement of Profit or Loss and other Comprehensive Income – 155 J Durairatnam Statement of Financial Position – 156 Chairman Statement of Changes in Equity – 158 Statement of Cash Flows – 160 Notes to the Financial Statements – 163 Other Disclosures – 297 The Bank’s agility was on full display in 2020 as it fully embraced its goal of becoming a customer centric, digital-first bank to serve our customers during unprecedented times. L H A L Silva Chief Executive Officer Supplementary Recognition Stewardship 77 79 301 Information Awards and Accolades – 77 Integrated Risk Management – 79 Quantitative Disclosures Key Events of the Year – 78 as per Schedule III of Banking w Corporate Governance – 104 Act Direction No. 01 of 2016, Capital Annual Report of the Board of Requirements under Basel III – 302 Directors on the State of the Affairs of the Bank – 124 Main Features of Regulatory Capital Instruments – Bank/Group – 318 Board Committee Reports – 131 Ten Year Summary – 323 Directors’ Statement of Internal Control – 140 Corporate Information – 324 Independent Assurance Report – 143 About this as in the past, complies with all Report applicable laws, regulations, and standards. This Annual Report has been prepared in accordance with the following: Statutory Frameworks Companies Act No. 07 of 2007 Sri Lanka Financial Reporting Standards Listing Rules of the Colombo Stock Exchange Reporting Frameworks GRI Standards International Integrated Reporting Council’s Integrated Reporting Framework* Smart Integrated Reporting Methodology™ This Annual Report is available as: This Integrated Annual Report serves as a disclosure of our strategy, governance, performance, and prospects and how Assurance A concise Integrated they help to create sustainable value Annual Report in print form within our operating environment. Provided by KPMG Sri Lanka on the Financial Statements, including the Notes to the Reporting period Accounts and boundary DFCC Bank’s Annual Report for 2020 * As provided in paragraphs 2.10 and 2.17-2.19 Online HTML covers the 12-month period from of the Integrated Reporting Framework, organisations are not required to adopt the 1 January 2020 to 31 December 2020. Framework’s categorisation of capitals and Our reporting covers DFCC Bank PLC as such, the capitals have been categorised (“DFCC Bank” or “Bank”) and the DFCC in a way that best describes the Bank’s value Bank Group (“Group”) comprising the creation process. CD and Bank and its subsidiaries, a joint venture PDF formats company, and an associate company. Precautionary The respective entities are duly identified where applicable. principle We take due cognisance of the social The “Perennial Compendium” Compliance and environmental consequences of available on the DFCC our actions, both direct and indirect. Bank website tracks As declared on page 13 the Board of The latter are more significant and arise the Bank’s activities Directors of DFCC Bank, in the spirit of from our lending operations, which are throughout the year good governance, accepts responsibility addressed through credit policies, post for the entirety of this Annual Report disbursement supervision, and risk 2020. The information contained herein, management processes. 2 DFCC Bank PLC Annual Report 2020 About DFCC Bank Established in 1955 as the first development bank in Sri Lanka and one of the oldest in the region, DFCC Bank has been the lender of choice for Vision trailblazing Sri Lankan entrepreneurs and continues to be the preferred lender To be the leading financial solutions for “Green” development projects provider sustainably developing including waste-to-energy, hydro, wind, individuals and businesses. and solar energy projects. Having honed its expertise in project lending for over six decades, the Bank turned to commercial banking in 2015. Today, DFCC Bank provides comprehensive development and commercial banking Mission services and is at the forefront of To provide innovative and responsible pioneering digitally-enabled products solutions true to our values with the and services, offering customers expertise of our multi-disciplinary team unparalleled service, convenience, of professionals and synergies of our and value. financial services group. Reach DFCC Bank delivers its services through 139 branches island-wide. Customers have access to over 4,500 ATMs across Values the country via the LankaPay ATM network and can avail themselves of the Bank’s services via online and mobile banking and DFCC MySpace, the Bank’s self-banking solution. Find more details Customer-centric on the Bank’s branch network on page 56. Innovative Professional Values Ethical Team-oriented Socially Responsible Accountable DFCC Bank PLC Annual Report 2020 3 A Pioneer’s Journey 1955 1995 2008 DFCC is incorporated under an Act Asia Money ranks DFCC as the Best Acuity Partners (Pvt) Limited commences of Parliament and is one of the first Managed Company in Sri Lanka. commercial operations. development banks to be instituted in Asia. 1996 2011 1956 Fixed Deposit Mobilisation is introduced. Shareholding in DFCC Vardhana Bank DFCC becomes the first bank to be listed Sri Lanka’s first BOO Power Project is increased to 99.1%. on the Colombo Brokers’ Association, the commissioned, financed by DFCC. precursor to the Colombo Stock Exchange. 2014 1977 1997 Appointed by GOSL to administer the EUR 90 Mn Credit Line from the European Association of Development Financing Appointed as the Administrative Unit of the Investment Bank. Institutions in Asia and the Pacific (ADFIAP) Energy Services Delivery Project funded by is formed with DFCC as a founder member. the World Bank. 2015 1984 1999 DFCC Bank and DFCC Vardhana Bank are amalgamated in October to form DFCC Finance Leasing is officially introduced. Asia Money ranks DFCC as the Best Bank PLC. Managed Company of the Decade. 1985 2016 2000 An Insurance Agency business is commenced. DFCC Virtual Wallet launches as yet another Structured and managed Sri Lanka’s Medium-term Working Capital Financing is financial inclusion enabler by DFCC Bank, first Rated Debenture Issue for Sri Lanka officially introduced. a first in Sri Lanka’s banking industry. Telecom. 1986 2017 2001 The Head Office is inaugurated. DFCC Bank launches DFCC Premier Go app DFCC acquired ABN AMRO Securities (Pvt) to empower Premier customers. Limited and renamed the company to DFCC Stock Brokers (Pvt) Limited. 1988 The first branch in Kandy is opened. 2018 2002 DFCC Bank launches DFCC iConnect, a cutting-edge payments solution for Fitch Ratings Lanka Limited assigned the 1989 businesses. SLAA National Rating for Implied Long-Term DFCC Credit Cards relaunched with Short-term Working Capital Financing is Unsecured Senior Debt of DFCC Bank. officially introduced. EMV-enabled chip and Visa payWave Managed the IPO of Sri Lanka Telecom – contactless technology. the largest offering on the Colombo Stock DFCC Bank crowned as one of Sri Lanka’s Exchange. “Most Admired Companies” by Chartered 1991 Institute of Management Accounts (CIMA) Appointed as the Administrative Unit of NAMAL is officially founded. and the International Chamber of Commerce the Renewable Energy for Rural Economic Sri Lanka (ICCSL) Development project funded by the World Bank. 1992 2020 Lanka Industrial Estates Limited is founded. 2003 DFCC Bank awarded the No. 1 Cash Lanka Ventures Limited is founded. Management Service Provider in Sri Lanka DFCC acquires 94.16% of MERC Bank and by Euromoney. renames it as DFCC Vardhana Bank. DFCC Bank awarded Market Leader in Cash 1993 Management (Domestic Banks) and Best Services in Cash Management in Sri Lanka Reached No. 1 position in Market by Asiamoney. Capitalisation. 2004 DFCC Consulting is founded. 4 DFCC Bank PLC Annual Report 2020 DFCC Group Structure Subsidiaries Joint Venture Acuity Partners Lanka Industrial DFCC Consulting (Pvt) Limited (Pvt) Limited Estates Limited Incorporated – 7 February 2008 Incorporated – 9 September 2004 Incorporated – 12 March 1992 Principal activity – Investment Principal activity – Consultancy Principal activity – Operating banking and related activities an industrial estate such as corporate finance, debt Directors structuring and IPOs Directors L H A L Silva L H A L Silva – Chairman R A Dasanayake Directors Dr A Saarrankan T W de Silva A J Alles – Chairman R A Dasanayake M R Abeywardena – MD T W de Silva R Dissanayake Dr R M K Ratnayake D Pallewatte