Capital Position

Sept 29, 2010 (LBO) – Fitch Ratings Lanka has confirmed DFCC Bank’s (DFCC) National Long-term rating at ‘AA(lka)’ with a stable outlook, a statement said. The agency has also affirmed DFCC’s senior debentures at ‘AA(lka)’ and subordinated debentures at ‘AA-(lka)’.

“DFCC’s ratings are driven by its strong capitalisation supported by ongoing high profitability,” the rating agency said.

“However, the ratings also take into account DFCC’s relatively high exposure to riskier project finance and the challenges in securing long-term funding for its longer tenure project loans.”

Fitch said the affirmation of DFCC’s ratings comes on the back of the ongoing, albeit gradual economic recovery, which together with increased recovery efforts helped ease non-performing loan (NPL) pressures faced by the bank in 2008-2010.

Absolute NPLs which peaked in June 2009 fell by 19 percent at the end of the 2010mfinancial year.

A sudden spike in NPLs at end-June 2010 – driven by a few large customers – also eased by end-August 2010, Fitch said.

“However, the continued loan contraction resulted in DFCC’s NPL ratios remaining high in relation to the