DFCC Bank PLC | Annual Report 2025 | Notes to the Financial Statements

1.1 Corporate information

DFCC Bank PLC (“the Bank”) is a limited liability public company incorporated and domiciled in Sri Lanka.

The Bank was incorporated in 1955 under DFCC Bank Act No. 35 of 1955 as a limited liability public company. The ordinary shares of the Bank were listed in the Colombo Stock Exchange (CSE).

Consequent to the enactment of the DFCC Bank (Repeal and Consequential Provisions) Act No. 39 of 2014, the DFCC Bank Act No. 35 of 1955 was repealed and the Bank was incorporated under the Companies Act No. 07 of 2007 as a public limited company listed in the Colombo Stock Exchange with the name “DFCC Bank PLC” with effect from 6 January 2015.

Bank also obtained a commercial banking license from the Monetary Board of the Central Bank of Sri Lanka in terms of the Banking Act No. 30 of 1988, as amended, and accordingly upon the amalgamation now operates as a licensed commercial bank.

The registered office of the Bank is at 73/5, Galle Road, Colombo 3.

Total staff strength of the Bank and the Group on 31 December 2025 was as follow:

Group – 2,578 (31 December 2024 – 2,532)

Bank – 2,500 (31 December 2024 – 2,439)

1.2 Consolidated financial statements

DFCC Bank PLC as the parent of subsidiaries under its control is required to present only the consolidated financial statements as per Sri Lanka Accounting Standard – SLFRS 10 on “Consolidated Financial Statements” and the proportionate share of the profit or loss and net assets of its Associates in terms of the Sri Lanka Accounting Standard – LKAS 28 on “Investments in Associates and Joint Ventures”. In addition to the consolidated financial statements, separate financial statements are also presented as per the Companies Act, No. 07 of 2007 and Banking Act No. 30 of 1988 and amendments thereto.

The Bank’s financial statements comprise the amalgamation of the financial statements of the Domestic Banking Unit (DBU) and the Foreign Currency Banking Unit (FCBU).

1.3 Parent Entity and Ultimate Parent Entity

The Bank does not have an identifiable parent of its own. The Bank is the ultimate parent of the Group companies.

1.4 Principal business activities, nature of operations of the Group and ownership by the Bank in its subsidiaries, associates.

A summary of principal activities of DFCC Bank PLC, its subsidiary companies, associate company and joint venture company (assets held for sale) is as follows:

Entity	Principal Business Activity
DFCC Bank PLC	Range of financial services such as accepting deposits, corporate credit and retail banking, personal financial services, project financing, investment banking, foreign currency operations, trade finance and dealing in government securities and treasury-related products.
Subsidiaries
DFCC Consulting (Pvt) Limited	Technical, financial, and other professional consultancy services in Sri Lanka and abroad.
Lanka Industrial Estates Limited and its subsidiaries	Leasing of land and buildings to industrial enterprises.
Synapsys Limited	Information technology services and information technology enabled services.
Associate
National Asset Management Limited and its subsidiaries	Management of Unit Trust and private portfolios
Asset held for sale*
Acuity Partners (Pvt) Limited and its subsidiaries and joint ventures	Investment banking-related financial services.

There were no significant changes in the nature of the principal activities of the Group during the financial year under review.

* The Bank sold the investment on 21 January 2025.

1.5 Approval of Financial Statements

The financial statements for the year ended 31 December 2025 were authorised for issue by the Directors on 24 February 2026.

1.6 Responsibility for Financial Statements

The responsibility of the Board of Directors in relation to the financial statements is set out in the Statement of Directors’ Responsibility report in the annual report.

2.1 Statement of Compliance

The consolidated financial statements of the Group and the separate financial statements of the Bank, which comprise the Statement of Financial Position, Income Statement, Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows and Notes thereto, have been prepared in accordance with Sri Lanka Accounting Standards (the “Accounting Standards”) laid down by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). The Accounting Standards comprises;

Sri Lanka Financial Reporting Standards (“SLFRS”);
Sri Lanka Accounting Standards (“LKAS”);
Statements of Recommended Practices (SoRPs);
Statement of Alternate Treatment (SoATs) and
Financial Reporting Guidelines issued by the CA Sri Lanka.

The Accounting Standards along with FAQs issued are available at the website of CA Sri Lanka www.casrilanka.com.

These financial statements, except for information on cash flows, have been prepared following the accrual basis of accounting.

Details of the Group’s material accounting policies followed during the year are given on Note 5 on pages 319 to 325.

These financial statements include the following components:

an Income Statement and Statement of Profit or Loss and Other Comprehensive Income providing information on the financial performance of the Group and the Bank for the year under review; (Refer pages 304 and 305).
a Statement of Financial Position providing information on the financial position of the Group and Bank as at the year end; (Refer pages 306 and 307).
a Statement of Changes in Equity depicting all changes in shareholders’ funds during the year under review of the Group and Bank; (Refer pages 308 and 311).
a Statement of Cash Flows providing information to the users, on the ability of the Group and Bank to generate cash and cash equivalents and the needs of the entity to utilise those cash flows; (Refer pages 312 and 314).
Notes to the financial statements comprising accounting policies and other explanatory information. (Refer pages 315 to 484).

The format used in the preparation and presentation of the financial statements and the disclosures made therein also comply with the specified formats prescribed by the Central Bank of Sri Lanka in the Circular No. 5 of 2024 on “Publication of Annual and Quarterly Financial Statements and Other Disclosures by Licensed Banks”.

2.2 Presentation of Financial Statements

These Financial Statements have been presented in compliance

with the requirements of the Companies Act No. 07 of 2007 and amendments thereto (Companies Act) and the Banking Act and provide appropriate disclosures as required by the Listing Rules of the CSE. The formats used in the preparation and presentation of the Financial Statements and the disclosures made therein also comply with the specified formats prescribed by the CBSL in the Circular No. 05 of 2024 dated December 31, 2024, on “Publication of Annual and Quarterly Financial Statements and Other Disclosures by Licensed Banks”. The Bank also expects to publish annual andquarterly financial information and other disclosures in the Annual Report, Press and the Website in compliance with the aforementioned Circular. The assets and liabilities of the Group presented in the Statement of Financial Position are grouped by nature and listed in an order that reflects their relative liquidity and maturity pattern.

2.3 Basis of Measurement

These financial statements have been prepared on the historical cost convention except for the following material items, which are measured on an alternative basis on each reporting date:

Financial Instruments

Item	Basis of measurement	Note
Financial assets measured at fair value through profit or loss	Fair value	30
Derivative financial assets and derivative financial liabilities	Fair value	29
Financial assets measured at fair value through other comprehensive income	Fair value	35

Non-Financial Assets/Liabilities

Item	Basis of measurement	Note
Retirement benefit obligations	Present value of defined benefit pension obligation less net pension assets of DFCC Bank Pension Fund, a trust separate from the Bank.	48
	Present value of the defined benefit gratuity obligation.	48

No adjustments have been made for inflationary factors affecting the financial statements.

2.4 Materiality and Aggregation

Each item which is similar in nature is presented separately if material. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard LKAS 1 on “Presentation of financial statements”.

2.5 Going concern

The financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its obligations as they fall due. Management has assessed the Group’s ability to continue as a going concern and is satisfied that it possesses sufficient resources to operate for the foreseeable future.

In conducting this assessment, the Group evaluated the improvements in current economic conditions and their potential impact on business operations, projected profitability, regulatory capital requirements, and funding needs. Based on several factors, including a consistent history of profitable operations, strong liquidity levels, access to stable external funding sources, a diversified lending portfolio, and initiatives implemented to strengthen borrower-level risk monitoring, Management considers the going concern assumption to be appropriate.

Furthermore, Management is not aware of any material uncertainties that could cast significant doubt on the Group’s ability to continue as a going concern. Accordingly, the financial statements of the Group continue to be prepared on a going concern basis.

2.6 Comparative information

Comparative information including quantitative, narrative and descriptive information, is disclosed in respect of the previous year in the financial statements in order to enhance the understanding of the current year’s financial statements and to enhance inter year comparability.

The presentation and classification of the Financial Statements of the previous year are amended, where relevant for better presentation and to be comparable with those of the current year.

In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

Progress Toward Economic Stability

The economic revival of Sri Lanka marks a pivotal shift toward a more resilient and sustainable growth trajectory. Supported by wide ranging macroeconomic reforms, decisive fiscal adjustments, and international assistance, particularly through the IMF Extended Fund Facility (EFF), the country has begun to demonstrate tangible, broad based signs of recovery.

A cornerstone of Sri Lanka’s revival is the completion of its external debt restructuring, which has materially reduced refinancing pressures and improved long term debt sustainability.

This restructuring effort, alongside stronger fiscal performance, has significantly improved Sri Lanka’s creditworthiness and restored investor confidence.

The economic reforms implemented have begun to yield encouraging results. Real GDP growth exceeding earlier expectations and reflecting a broad based rebound across key sectors. Inflation reached -0.3% in year 2025, aided by lower energy prices, currency appreciation, and muted consumer demand. Even though Cyclone Ditwah has impacted and slow down the reviving progress the IMF and World Bank project a significant GDP expansion driven by a robust recovery in tourism, revival in agriculture following policy normalisation, strengthening private credit growth, modest improvements in industrial activity.

The continued improvements in Sri Lanka’s macroeconomic environment have had a favourable impact on the Bank’s key accounting estimates, particularly those relating to the measurement of Expected Credit Losses (ECL), fair value assessments, and the determination of recoverable amounts of non financial assets. As economic conditions stabilised, driven by easing inflationary pressures, a more stable exchange rate, and a downward trajectory in interest rates, the Bank reassessed the forward looking information incorporated into its ECL models to ensure alignment with the updated economic outlook.

The successful completion of external debt restructuring, including progress on International Sovereign Bonds (ISBs), together with expectations of a return to positive GDP growth, supported a more optimistic view of credit risk. This has contributed to improved credit quality indicators and resulted in reduced ECL provisions for certain portfolios. The recovery witnessed across key sectors such as tourism, agriculture and apparel has further strengthened expectations of enhanced borrower repayment capacity, thereby reducing the assessed probability of default.

The Bank reviews all estimates and underlying assumptions on a continuous basis. Revisions to estimates are recognised prospectively in accordance with the relevant financial reporting standards.

4.1 key Judgements

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements are included in the following notes:

Item	Note
Establishing the criteria for determining whether credit risk on the financial asset has increased significantly since initial recognition, determining methodology for incorporating forward-looking information into measurement of Expected Credit Loss (ECL) and selection and approval models used to measure ECL.	16
Classification of financial assets: assessment of the business model within which the assets are held and assessment of whether the contractual terms of the financial assets are Solely Payment of Principal and Interest (SPPI)	5.3.2
Determination of control over investees	36 and 37
Derivative assets	29

4.2 Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in material adjustments to the carrying amounts of assets and liabilities is included in the following notes:

Item	Note
Impairment of financial instruments: determining inputs into the ECL measurement model, including incorporation of forward looking information and key assumptions used in estimating recoverable cash flows.	16 and 32
Determination of the fair value of financial instruments with significant unobservable inputs. Recognition of deferred tax assets availability of future taxable profits against which deductible temporary differences and tax losses carried forward can be utilised.	9.3.1
Measurement of defined benefit obligations: key actuarial assumptions.	48.2.2
Impairment testing for Cash Generating Units (CGU) containing goodwill: key assumptions underlying recoverable amounts.	5.4
Recognition and measurement of contingencies: key assumptions about the likelihood and magnitude of an outflow of resources.	58

The material accounting policies set out below have been applied consistently to all periods presented in the financial statements of the Group.

These accounting policies have been applied consistently by Group entities.

Set out below is an index of the material accounting policies:

		Note

A	Basis of consolidation	5.1
B	Foreign currency	5.2
C	Discontinued operations	22
D	Interest	11
E	Fee and commission	12
F	Net trading income	13
G	Dividend income	15
H	Leases	52
I	Income tax	21
J	Financial assets and financial liabilities	5.3
	– Recognition and initial measurement	5.3.1
	– Classification	5.3.2
	– Derecognition	5.3.4
	– Modification of financial assets and financial liabilities	5.3.5
	– Offsetting	5.3.6
	– Fair value measurement	5.3.7
	– Impairment	5.3.8
	– Designation at fair value through profit or loss	5.3.9
K	Cash and cash equivalents	26
L	Trading assets and liabilities	30
M	Derivatives held for risk management purposes and hedge accounting	29
N	Loans and advances to banks	31
O	Loans and advances to customers	32
P	Debt and other instruments	34
Q	Investment securities	34, 35
R	Property, plant and equipment	39
S	Investment properties	38
T	Assets held for sale	43
U	Intangible assets and goodwill	40
V	Impairment of non-financial assets	5.4
W	Deposits, debt securities in issue and subordinated liabilities	45,47,51
X	Provisions	50
Y	Financial guarantees and loan commitments	58
Z	Employee retirement benefits	48
AA	Share capital, other equity and reserves	53,54,55,56
AB	Earnings per share	23
AC	Segment reporting	60

5.1 Basis of consolidation

5.1.1 Business combinations

The Group accounts for business combinations using the acquisition method, when the acquired set of activities and assets meets the definition of a business and control, is transferred to the Group.

In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process, and whether the acquired set has the ability to produce outputs. The Group has an option to apply a “concentration test” that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

The consideration transferred in the acquisition is generally

measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment . Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in the income statement.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in the income statement.

5.1.2 Subsidiaries

Details of the Bank’s subsidiaries, how they are accounted in the financial statements and their contingencies are set out in Note 36 and 58 on pages 431 to 468.

5.1.3 Non-controlling interests (NCI)

Details of non-controlling interests are given in Note 57 on page 467.

5.1.4 Loss of control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in the income statement. Any interest retained in the former subsidiary is measured at fair value when control is lost.

5.1.5 Interests in equity-accounted investees

The Group’s interests in equity-accounted investees comprise interests in associates.

Details of the Bank’s equity-accounted investees, how they are accounted in the financial statements and their contingencies are set out in Note 37 on page 432.

5.1.6 Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated.

Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

5.1.7 Financial statements of subsidiaries, and associate company, included in the consolidated financial statements

The financial statements of DFCC Consulting (Pvt) Limited, Synapsys Limited, Lanka Industrial Estates Limited and National Asset Management Limited included in the consolidation have financial years ending on 31 December.

Audited financial statements are used for consolidation of companies, which have a similar financial year end, as the Bank for others a special review is performed.

5.2 Foreign currency

5.2.1 Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the date of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the year, adjusted for effective interest, impairment and payments during the year, and the amortised cost in the foreign currency translated at the spot exchange rate at the end of the year.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Foreign currency differences arising on translation are generally recognised in profit or loss. However, foreign currency differences arising from the translation of the following items are recognised in OCI:

equity investments in respect of which an election has been made to present subsequent changes in fair value in OCI;
a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and
qualifying cash flow hedges to the extent that the hedges are effective

5.2.2 Foreign operations

The Bank does not have any foreign operations that is a subsidiary, associate, joint venture or a branch. Therefore, there is no exchange differences recognised in other comprehensive income.

5.3 Financial assets and financial liabilities

5.3.1 Recognition and initial measurement

The Group initially recognises loans and advances, deposits, debt securities issued and subordinated liabilities on the date on which they are originated. All other financial instruments (including regular-way purchases and sales of financial assets) are recognised on the trade date, which is the date on which the Group becomes a party to the contractual provisions of the instrument.

Financial asset or financial liability is measured initially at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. The fair value of a financial instrument at initial recognition is generally its transaction price.

5.3.2 Classification

5.3.2.1 Financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost, FVOCI or FVTPL.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI.

A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL:

the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis.

All other financial assets are classified as measured at FVTPL.

In addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

5.3.2.1.1 Business model assessment

The Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether Management’s strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets;
how the performance of the portfolio is evaluated and reported to the Group’s Management;
the risks that affect the performance of the business model (and the financial assets held within that business model) and its strategy for how those risks are managed;
how managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected); and
the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Group’s stated objective for managing the financial assets is achieved and how cash flows are realised.

The Group’s retail, small and medium enterprises and corporate banking business comprises primarily loans to customers that are held for collecting contractual cash flows. In the retail business the loans comprise mortgages, overdrafts, unsecured personal lending and credit card facilities. Sales of loans from these portfolios are very rare.

Certain debt securities are held by the Group Central Treasury in a separate portfolio for long-term yield. These securities may be sold, but such sales are not expected to be more than infrequent. The group considers that these securities are held within a business model whose objective is to hold assets to collect the contractual cash flows.

Certain other debt securities are held by the Group Central Treasury in separate portfolios to meet everyday liquidity

needs. The Group Central Treasury seeks to minimise the costs of managing these liquidity needs and therefore actively manages the return on the portfolio. That return consists of collecting contractual cash flows as well as gains and losses from the sale of financial assets. The investment strategy often results in sales activity that is significant in value. The Group considers that these financial assets are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.

Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

5.3.2.1.2 Assessment of whether Contractual Cash Flows are Solely Payments of Principal and Interest (SPPI)

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.

In assessing whether the contractual cash flows are SPPI, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Group considers:

contingent events that would change the amount and timing of cash flows;
leverage features;
prepayment and extension terms;
terms that limit the Group’s claim to cash flows from specified assets; and
features that modify consideration of the time value of money.

Equity instruments have contractual cash flows that do not meet the SPPI criterion. Accordingly, all such financial assets are measured at FVTPL unless the FVOCI option is selected.

5.3.2.2 Financial liabilities

On initial recognition, the Bank classifies financial liabilities, other than financial guarantees and loan commitments, into one of the following categories:

financial liabilities at amortised cost; and
financial liabilities at fair value through profit or loss

5.3.2.2.1 Financial liabilities at amortised cost

Financial Liabilities issued by the Bank that are not designated at fair value through profit or loss are recognised initially at fair value plus any directly attributable transaction costs, by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. Deposit liabilities including savings deposits, current deposits, fixed/time deposits, call deposits, certificates of deposit and debentures are classified as financial liabilities measured at amortised cost.

The EIR amortisation is included in “Interest expense” in the income statement. Gains and losses too are recognised in the income statement when the liabilities are derecognised as well as through the EIR amortisation process.

5.3.2.2.2 Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include derivative liabilities held for risk management purposes.

5.3.3 Reclassifications

Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes its business model for managing financial assets. Financial Liabilities are not reclassified as such reclassification are not permitted by SLFRS 9.

Other than above, the Bank has applied options given under Statement of Alternative Treatment SoAT as explained in Note 34.5.1 for reclassification of part of instrument during year 2022.

5.3.4 Derecognition

5.3.4.1 Financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount

allocated to the portion of the asset derecognised) and the sum of;

the consideration received (including any new asset obtained less any new liability assumed) and
any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.

Any cumulative gain or loss recognised in OCI in respect of equity investment securities designated as at FVOCI is not recognised in profit or loss on derecognition of such securities. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability.

The Group enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised. Examples of such transactions are securities lending and sale-and-repurchase transactions.

When assets are sold to a third party with a concurrent total return swap on the transferred assets, the transaction is accounted for as a secured financing transaction similar to sale and repurchase transactions, because the Group retains all or substantially all of the risks and rewards of ownership of such assets.

5.3.4.2 Financial liabilities

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

5.3.5 Modifications of financial assets and financial liabilities

5.3.5.1 Financial assets

If the terms of a financial asset are modified, then the Group evaluates whether the cash flows of the modified asset are substantially different.

fees that are considered in determining the fair value of the new asset and fees that represent reimbursement of eligible transaction costs are included in the initial measurement of the asset; and
other fees are included in profit or loss as part of the gain or loss on derecognition.

If cash flows are modified when the borrower is in financial difficulties, then the objective of the modification is usually to maximise recovery of the original contractual terms rather than to originate a new asset with substantially different terms. If the Group plans to modify a financial asset in a way that would result in forgiveness of cash flows, then it first considers whether a portion of the asset should be written off before the modification takes place. This approach impacts the result of the quantitative evaluation and means that the derecognition criteria are not usually met in such cases.

If the modification of a financial asset measured at amortised cost or FVOCI does not result in derecognition of the financial asset, then the Group first recalculates the gross carrying amount of the financial asset using the original effective interest rate of the asset and recognises the resulting adjustment as a modification gain or loss in profit or loss. For floating-rate financial assets, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification. Any costs or fees incurred and modification fees received adjust the gross carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.

If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income calculated using the effective interest rate method.

5.3.5.2 Financial liabilities

The Group derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in income statement. Consideration paid includes non-financial assets transferred, if any, and the assumption of liabilities, including the new modified financial liability.

If the modification of a financial liability is not accounted for as derecognition, then the amortised cost of the liability is recalculated by discounting the modified cash flows at the original effective interest rate and the resulting gain or loss is recognised in the income statement. For floating-rate financial liabilities, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification. Any costs and fees incurred are recognised as an adjustment to the carrying amount of the liability and amortised over the remaining term of the modified financial liability by re-computing the effective interest rate on the instrument.

5.3.6 Offsetting

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position, only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously. Income and expenses are not offset in the Income Statement, unless required or permitted by an Accounting Standard or Interpretation (issued by the SLFRS Interpretations Committee and Standard Interpretations Committee) and as specifically disclosed in the significant accounting policies of the Bank/Group.

5.3.7 Fair value measurement

“Fair value” is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as “active” if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability, nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in based on a valuation technique for which any unobservable inputs are judged to be insignificant in, relation to the difference, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price.

Subsequently, that difference is recognised in the income statement on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price.

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for the particular risk exposure. Portfolio level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.

The fair value of a financial liability with a demand feature (e.g. a demand deposit) is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid.

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

5.3.8 Impairment

Details of impairment is given in Note 16 on page 381.

5.3.9 Designation at fair value through profit or loss

On initial recognition, the Bank may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI or at FVTPL, if doing so eliminated or significantly reduces an accounting mismatch that would otherwise arise.

The Bank has not designated any financial asset upon initial recognition at fair value through profit or loss as at the reporting date.

5.4 Impairment of non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than investment properties and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

The Group’s corporate assets do not generate separate cash inflows and are used by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGUs to which the corporate assets are allocated.

Impairment losses are recognised in income statement. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2026 and earlier application is permitted; however, the Group has not early adopted the new and amended standards in preparing these consolidated financial statements.

Accounting Standard	Descriptions	Effective Date
IFRS 18 – Presentation and Disclosure in Financial Statements	introduces a revised structure for the primary financial statements, including new defined subtotals such as ‘operating profit’ and enhanced disclosure requirements for management-defined performance measures. The Bank expects that IFRS 18 will primarily affect the presentation and disclosure format of the financial statements, with no impact on recognition or measurement of underlying balances.	01 January 2027
IFRS 19 – Subsidiaries without Public Accountability: Disclosures	Permits eligible subsidiaries to apply full IFRS recognition and measurement with reduced disclosure requirements. As the Bank is publicly accountable, IFRS 19 is not expected to apply to the Bank; however, its implications on subsidiaries within the Group will be evaluated once SLFRS adoption is finalised	01 January 2027
IFRS 9 and IFRS 7 – Classification and Measurement,	Introduce further guidance on the assessment of contractual cash flow characteristics, including instruments with sustainability-linked or variable features, and require expanded disclosures. The Bank is reviewing its financial instruments to determine whether these amendments will affect classification, measurement or disclosure requirements upon local adoption.	01 January 2027

This note presents information about the Bank’s exposure to financial risk and the Bank’s management of capital.

8.1 Introduction and Overview

The Bank has exposure to the following key risks from financial instruments:

credit risk

market risk

liquidity risk

operational risk

The following chart provides a link between the Bank’s business units and the principal risks that they are exposed to. The significance of risk is assessed within the context of the Bank as a whole and is measured based on allocation of the regulatory capital within the Bank.

This note presents information about the Bank’s exposure to each of the above risks, the objectives, policies and processes for measuring and managing such risk.

Risk Management Framework

The Board of Directors has the overall responsibility for the establishment and oversight of the Bank’s risk management framework.

The Board Integrated Risk Management Committee (BIRMC) provides the Board, the assurance that risk management strategies, policies and processes are in place to manage events/outcomes that have the potential to impact significantly on earnings performance, reputation and capital.

Bank’s risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits, controls, and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and Bank’s activities. The Bank, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

Internal audit undertakes both regular and ad-hoc reviews of risk management controls and procedures. These results are then reported to the Bank Audit Committee.


8.2 Credit risk
8.2.1 Settlement risk
8.2.2 Management of credit risk
8.2.3 Credit quality analysis
8.2.4 Collateral held and other credit enhancements
8.2.5 Amounts arising from ECL
8.2.6 Concentration of credit risk
8.2.7 Offsetting financial assets and financial liabilities
8.3 Liquidity risk
8.3.1 Management of liquidity risk
8.3.2 Exposure to liquidity risk
8.3.3 Maturity analysis for financial liabilities and financial assets
8.3.4 Repurchase and reverse repurchase transactions in scripless Treasury Bonds and scripless Treasury Bills
8.3.5 Liquidity reserves
8.3.6 Financial assets available to support future funding
8.4 Market risk
8.4.1 Management of market risk
8.4.2 Exposure to market risk – Trading portfolios
8.4.3 Exposure to market risk – Non-trading portfolios
8.4.4 Interest rate risk
8.4.5 Foreign exchange risk
8.4.6 Market risk exposure for regulatory capital assessment
8.5 Operational risk
8.6 Capital management

8.2 Credit Risk

Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from Bank’s loans and advances to customers and other banks and investment in debt securities.

8.2.1 Settlement Risk

The Bank’s activities may give rise to risk at the time of settlement of transactions and trades. Settlement risk is the risk of loss due to the failure of an entity to honour its obligations to deliver cash, securities, or other assets as contractually agreed.

8.2.2 Management of Credit Risk

The Board of Directors, BIRMC, and the Credit Committee are responsible for the oversight of credit risk. Management of credit risk includes the following;

Formulating credit policies in consultation with business units covering collateral requirements, credit assessment, risk grading and reporting, documentary and legal procedures and compliance with regulatory and statutory requirements.
Establishing the authorisation structure for the approval and renewal of credit facilities are vested with the Board of Directors. Authorisation limits are allocated to business unit heads.
Reviewing and assessing credit risk: Bank assesses all credit exposures in excess of designated limits, before facilities are committed to customers by the business unit concerned. Renewals and reviews of facilities are subject to the same review process.
Limiting concentration of exposure to counterparties, industries (for loans and advances, financial guarantees and similar exposures), credit ratings and countries.
Developing and maintaining the Bank’s processes for measuring ECL: This includes processes for:

initial approval, regular validation and back-testing of the models used;
determining and monitoring significant increase in credit risk; and
incorporation of forward-looking information.
Reviewing compliance of business units with agreed exposure limits, including those for selected industries, country risk and product types. Regular reports on the credit quality of portfolios are provided to bank credit, which may require appropriate corrective action to be taken. These include reports containing estimates of Expected Credit Loss( ECL) allowances.
Providing advice, guidance and specialist skills to business units to promote best practice throughout the Bank in the management of credit risk.
Determining risk rating for each lending client based on financial risk, non financial risk and industry risk parameters.

Each business unit is required to follow bank credit policies and procedures. Business units are responsible for the quality and performance of its credit portfolio and for monitoring and controlling all credit risks in its portfolios, including those subject to central approval.

Regular audits of business units and bank credit processes are undertaken by internal audit.

Credit risk management approaches as described in 1 to 8 above are revised periodically and strengthened as required in line with the regulatory requirements and economic environment. During the year, all relevant policies, guidelines and processes have been reviewed and updated accordingly.

8.2.3 Credit Quality Analysis – Bank

The following table sets out information about the overdue status of loans and advances to customers in Stages 1, 2, and 3.

8.2.3.1 Loans and advances to customers at amortised cost – gross carrying amount

As at 31 December	2025
	Stage 1 LKR ’000	Stage 2 LKR ’000	Stage 3 LKR ’000	Total LKR ’000
Current	396,251,868	29,247,281	7,138,911	432,638,060
Overdue < 30 days	35,053,869	8,611,646	1,079,851	44,745,366
Overdue > 30 days	–	16,065,421	65,541,862	81,607,283
Total	431,305,737	53,924,348	73,760,624	558,990,709

As at 31 December	2024
	Stage 1 LKR ’000	Stage 2 LKR ’000	Stage 3 LKR ’000	Total LKR ’000
Current	276,377,076	36,729,667	4,864,566	317,971,309
Overdue < 30 days	30,400,177	7,943,394	890,951	39,234,522
Overdue > 30 days	–	20,849,857	62,851,256	83,701,113
Total	306,777,253	65,522,918	68,606,773	440,906,944

8.2.3.2 Loans and advances to customers at fair value through other comprehensive income – gross carrying amount

As at 31 December	2025
	Stage 1 LKR ’000	Stage 2 LKR ’000	Stage 3 LKR ’000	Total LKR ’000
Current	4,619,866	–	–	4,619,866
Overdue < 30 days	–	–	–	–
Overdue > 30 days	–	–	–	–
Total	4,619,866	–	–	4,619,866

8.2.3.3 The following table shows an analysis of counterparty credit exposures arising from

derivative transactions.

Credit risk arising from derivative financial instruments at any time is limited to those with positive fair values, as reported in the statement of financial position. With gross settled derivatives, the bank is also expose to a settlement risk, being the risk that the counterparty failing to deliver the value.

	Derivative type				Derivative type
As at 31 December 2025	Forward		Currency SWAP		Spot		Interest rate SWAP		Total
In LKR ’000	Notional amount	Fair value	Notional amount	Fair value	Notional amount	Fair value	Notional amount	Fair value	Notional amount	Fair value
Derivative financial assets (Note 1)	15,299,415	7,091	99,379,028	8,486,354	2,555,533	556	–	–	117,233,976	8,494,001
Derivative financial liabilities (Note 2)	15,321,582	(46,951)	91,638,602	(145,095)	2,561,245	(6,465)	4,025,450	(2,489)	113,546,879	(201,000)
Note 1
Derivative financial assets by counterparty type
With banks	13,665,970	5,852	99,379,028	8,486,354	1,691,803	–	–	–	114,736,801	8,492,206
With other customers	1,633,445	1,239	–	–	863,730	556	–	–	2,497,175	1,795
Total	15,299,415	7,091	99,379,028	8,486,354	2,555,533	556	–	–	117,233,976	8,494,001
Note 2
Derivative financial liabilities by counterparty type
With banks	13,688,611	(45,722)	91,638,602	(145,095)	1,696,819	(5,134)	4,025,450	(2,489)	111,049,482	(198,440)
With other customers	1,632,971	(1,229)	–	–	864,426	(1,331)	–	–	2,497,397	(2,560)
Total	15,321,582	(46,951)	91,638,602	(145,095)	2,561,245	(6,465)	4,025,450	(2,489)	113,546,879	(201,000)

	Derivative type				Derivative type
As at 31 December 2024 In LKR ’000	Forward		Currency SWAP		Spot		Interest rate SWAP		Total
	Notional amount	Fair value	Notional amount	Fair value	Notional amount	Fair value	Notional amount	Fair value	Notional amount	Fair value
Derivative financial assets (Note 1)	25,832,218	115,450	83,963,792	9,527,979	539,895	13	–	–	110,335,905	9,643,442
Derivative financial liabilities (Note 2)	25,773,312	(55,594)	76,356,135	(852,241)	541,217	(1,353)	–	–	102,670,664	(909,188)
Note 1
Derivative financial assets by counterparty type
With banks	22,146,159	86,052	83,963,792	9,527,979	539,895	13	–	–	106,649,846	9,614,044
With other customers	3,686,059	29,398	–	–	–	–	–	–	3,686,059	29,398
Total	25,832,218	115,450	83,963,792	9,527,979	539,895	13	–	–	110,335,905	9,643,442
Note 2
Derivative financial liabilities by counterparty type
With banks	22,112,665	(52,034)	76,356,135	(852,241)	541,217	(1,353)	–	–	99,010,017	(905,628)
With other customers	3,660,647	(3,560)	–	–	–	–	–	–	3,660,647	(3,560)
Total	25,773,312	(55,594)	76,356,135	(852,241)	541,217	(1,353)	–	–	102,670,664	(909,188)

8.2.4 Collateral Held and Other Credit Enhancements – Bank

The Bank holds collateral and other credit enhancements against certain of its credit exposures. The following table sets out the principal types of collateral held against different types of financial assets.

8.2.4.1 Collateral held and other credit enhancements – Measured at amortised cost

The following table sets out the principal types of collateral held by the Bank against loans and advances for each loan, the value of the collateral is capped at the amortised cost of the loan.

As at 31 December	2025		2024
As at 31 December	Gross loan balance LKR ’000	Mix %	Gross loan balance LKR ’000	Mix %
Stage 1
Cash collateral	53,414,445	12.38	36,797,786	11.99
Property plant and machinery	97,473,465	22.60	55,726,004	18.16
Treasury guarantee	6,556,251	1.52	9,138,143	2.98
Motor vehicles	29,696,982	6.89	20,877,080	6.81
Gold	26,671,510	6.18	15,795,882	5.15
Others securities*	180,004,151	41.73	117,218,260	38.21
Unsecured	37,488,933	8.69	51,224,098	16.70
Total	431,305,737	100.00	306,777,253	100.00
Stage 2
Cash collateral	3,081,500	5.71	3,780,338	5.77
Property plant and Machinery	18,533,726	34.37	14,876,616	22.70
Motor vehicles	4,636,971	0.94	3,538,108	1.01
Gold	296,129	0.06	272,264	0.08
Others securities*	26,634,755	49.39	33,917,529	51.76
Unsecured	741,267	1.37	9,138,063	13.95
Total	53,924,348	91.85	65,522,918	100.00
Stage 3
Cash collateral	544,985	0.74	237,683	0.35
Property plant and machinery	29,860,885	40.48	12,474,866	18.18
Motor vehicles	1,376,268	0.28	1,483,028	0.42
Gold	183,683	0.04	83,876	0.02
Others securities*	34,901,047	47.32	30,949,157	45.11
Unsecured	6,893,756	9.35	23,378,163	34.08
Total	73,760,624	100.00	68,606,773	100.00
Grand Total	558,990,709		440,906,944

*Other Securities include Quoted and Unquoted shares, Inventories, Trade Receivables, Personal Guarantees and Corporate Guarantees etc.

8.2.4.2 collateral held and other credit enhancements – measured at fair value through other comprehensive income

The following table sets out the principal types of collateral held by the Bank against loans and advances for each loan, the value of the collateral is capped at the fair value of the loan.

As at 31 December	2025		2024
As at 31 December	Gross loan balance LKR ’000	Mix %	Gross loan balance LKR ’000	Mix %
Stage 1
Unsecured	4,619,866	100.00	–	–
Total	4,619,866	100.00	–	–

8.2.4.3 Derivatives, Reverse Sale-and-Repurchase Agreements and Securities Borrowing

The Bank mitigates credit risk of derivatives, reverse sale-and-repurchase agreements and securities lending by entering into master agreements and holding collateral in the form of cash and marketable securities.

DFCC Bank requires counterparties to sign an ISDA master agreement (International Swaps and Derivative Association) in order to enter into swaps and other derivative transactions. The agreement outlines the terms and conditions to be applied to the derivative transactions agreed by DFCC Bank and other parties. Any dispute of the transaction will be handled according to the terms of the agreement.

The Bank’s sale-and-repurchase, and reverse sale-and-repurchase, transactions and securities borrowing and lending are covered by master agreements. A master agreement has to be signed by both parties to enter such transactions. All terms and conditions are stipulated in the master agreement.

8.2.4.4 Loan to Value Ratio of Residential Mortgage Lending

The following tables stratify credit exposures by ranges of loan-to-value (LTV) ratio. LTV is calculated as the ratio of the gross amount of the loan to the value of the collateral. The valuation of the collateral excludes any adjustments for obtaining and selling the collateral. The value of the collateral is based on valuations made by independent professional valuers.

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
LTV ratio
Stage 1
Less than 50%	4,994,522	2,220,708
51%-70%	3,982,079	495,100
71%-90%	6,279,550	355,360

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
More than 90%	4,814,425	8,582,862
Total	20,070,576	11,654,030
Stage 2
Less than 50%	221,760	346,758
51%-70%	74,721	48,796
71%-90%	468,218	49,336
More than 90%	208,856	1,159,416
Total	973,555	1,604,306
Stage 3
Less than 50%	269,746	425,078
51%-70%	334,786	81,574
71%-90%	689,844	136,395
More than 90%	618,223	1,467,320
Total	1,912,599	2,110,367
Carrying amount – amortised cost	22,956,730	15,368,703

8.2.4.5 Assets Obtained by Taking Possession of Collateral

The Bank’s policy is to pursue timely realisation of the collateral in an orderly manner. The Bank does not generally use the non-cash collateral for its own operations.

8.2.4.6 Analysis of Credit Risk by Risk Rating

Bank

High Grade

Standard Grade

Sub–Standard Grade

Low Grade

Unrated

Exposures not subject to Rating

Total LKR ’000

As at 31 December 2025

Note

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Financial assets

Cash and cash equivalents

615,717

–

14,619,288

7,530,068

–

6,018

–

22,771,091

Balances with Central Bank of Sri Lanka

–

2,952,879

–

2,952,879

Placement with banks

16,456,076

–

15,993,873

–

4,992,963

–

37,442,912

Derivative financial instruments

–

8,450,067

–

42,452

–

1,482

–

8,494,001

Financial assets measured at fair value through profit and loss

4,036,518

–

712,054

–

50,197

–

4,216,236

–

9,015,005

Financial assets measured at amortised cost loans and advances to customers (gross)*

89,925,508

2,399,672

–

162,430,988

10,389,945

156,483

–

133,831,239

24,617,117

9,733,042

–

8,258,763

15,850,822

63,053,758

–

1,155,838

86,373

19,507

–

35,703,401

580,419

797,834

–

558,990,709

Financial assets measured at fair value through other comprehensive income –
loans and advances to customers (gross)*

4,605,823

–

4,605,823

Financial assets measured at amortised cost debt and other instruments

114,578,242

–

217,448

–

114,795,690

Financial assets measured at fair value through other comprehensive income

91,510,275

–

30,962,111

–

1,000,710

–

1,079,721

–

124,552,817

Other financial assets

3,701,881

–

2,496,719

6,198,600

Off balance sheet exposures

–

Contingent liabilities and commitments*

55,449,992

237,252

–

58,025,032

174,052

–

48,666,497

1,044,719

606,592

–

6,384,927

2,364,117

328,272

–

4,654,133

5,438

–

14,159,316

62,449

3,029

–

192,165,817

* Categorisation based on Bank’s internal risk rating. Accordingly, AAA to AA- is considered as “High grade”, A+ to BBB- as “Standard Grade”, BB+ to B- as “Sub Standard Grade”, CCC+ and below as “Low Grade”.

Unrated exposure includes facilities granted for short term working capital requirements. Exposures not subject to rating under loans and advances to customers comprise of pawning advances against gold and credit cards. Pawning advances are of small ticket size and rely on underlying assets with minimal risk and by regulation does not require risk rating. Due to the large number of transactions the Bank monitors this at portfolio level. Card risk is analysed using a scorecard and is managed outside of the main rating system.

Contingent liabilities and commitments includes Guarantees and Bonds, Documentary Credit and Commitments for Unutilised Credit Facilities.

Bank

High Grade

Standard Grade

Sub–Standard Grade

Low Grade

Unrated

Exposures not subject to Rating

Total

LKR ’000

As at 31 December
2024

Note

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Stage 1
LKR ’000

Stage 2
LKR ’000

Stage 3
LKR ’000

Exposures
not subject
to ECL
LKR ’000

Financial assets

Cash and cash equivalents

95,208

–

10,487,340

2,922,258

–

13,504,806

Balances with Central Bank of Sri Lanka

–

2,328,346

–

2,328,346

Placement with banks

3,400,567

–

7,235,031

–

593,894

–

11,229,492

Derivative financial instruments

–

9,465,741

–

148,291

–

29,410

–

9,643,442

Financial assets measured at fair value through profit and loss

2,365,890

–

3,640,960

–

1,409,168

–

7,416,018

Financial assets at amortised cost–Loan and receivable from bank

–

1,500,338

–

1,500,338

Financial assets measured at amortised cost loans and advances to customers (gross)*

72,274,314

5,757,492

6,535

–

113,542,707

11,183,151

87,394

–

91,128,752

28,704,017

8,064,558

6,370,345

19,090,022

59,354,315

–

1,268,133

181,249

24,485

–

22,389,471

472,115

1,007,889

–

440,906,944

Financial assets measured at amortised cost debt and other instruments

105,424,311

–

217,379

–

105,641,690

Financial assets measured at fair value through other comprehensive income

114,276,628

–

22,078,312

–

1,903,286

–

138,258,226

Other financial assets

3,960,376

–

986,152

4,946,528

Off balance sheet exposures

Contingent liabilities and commitments*

38,938,477

161,116

–

41,691,496

647,613

–

33,612,440

4,284,741

28,406

–

3,486,617

288,374

979,344

–

4,404,575

9,450

–

10,070,120

93,724

236,909

–

138,933,402

* Categorisation based on Bank’s internal risk rating. Accordingly, AAA to AA- is Considered as “High Grade”, A+ to BBB- as “Standard Grade”, BB+ to B- “Sub Standard Grade”, CCC+ and below as “Low Grade”.

Contingent liabilities and commitments includes Guarantees and Bonds, Documentary Credit and Commitments for Unutilised Credit Facilities.

8.2.5 Amounts Arising from ECL – Bank

8.2.5.1 FORWARD LOOKING INFORMATION

The bank has identified and documented key drivers of credit risk and credit losses for each portfolio of financial instruments and using an analysis of historical data has estimated the relationship between macroeconomic variables and credit risk and credit losses. The Bank has used quantitative macro economic indicators including the following forecasted indicators published by the Central Bank of Sri Lanka and International Monetary Fund (IMF).

Macro Economic Variables	2025 (%)	2026 (%)	2027 (%)
GDP Growth Rate	4.2	2.9	3.1
Inflation Rate	-0.3	5.4	5.0
Unemployment Rate	4.2	4.2	4.2

Exchange rate is derived using an internally developed statistical methodology.

Financial assets at amortised cost – Loans and advances to customers – ECL

	2025				2024
	Stage 1 LKR ’000	Stage 2 LKR ’000	Stage 3 LKR ’000	Total LKR ’000	Stage 1 LKR ’000	Stage 2 LKR ’000	Stage 3 LKR ’000	Total LKR ’000
Balance as at 1 January	3,412,778	5,930,684	36,516,429	45,859,891	3,500,658	7,235,925	35,180,673	45,917,256
Transfer to Stage 1	1,237,589	(812,732)	(424,857)	–	1,754,116	(1,058,811)	(695,305)	–
Transfer to Stage 2	(205,165)	2,450,013	(2,244,848)	–	(214,129)	702,822	(488,693)	–
Transfer to Stage 3	(13,998)	(144,898)	158,896	–	(29,803)	(1,050,128)	1,079,931	–
Net remeasurement of loss allowance	(2,420,351)	(4,657,904)	9,237,489	2,159,234	(3,461,790)	(1,728,452)	4,724,434	(465,808)
New financial assets originated or purchased	1,825,103	807,096	–	2,632,199	1,863,726	1,829,328	51,001	3,744,055
Write-off	–	–	(2,820,066)	(2,820,066)	–	–	(2,955,214)	(2,955,214)
Foreign exchange and other movement	–	–	235,206	235,206	–	–	(380,398)	(380,398)
Balance as at 31 December*	3,835,956	3,572,259	40,658,249	48,066,464	3,412,778	5,930,684	36,516,429	45,859,891

* Total ECL balance as at 31 December 2025 include management judgemental adjustment of LKR 2,692 Mn as explained in Note 16.3.1 (2024 – LKR 4,308 Mn.)

Financial assets at amortised cost – debt and other instruments – ecL

	2025			2024
	Stage 1 LKR ’000	Stage 2 LKR ’000	Total LKR ’000	Stage 1 LKR ’000	Stage 2 LKR ’000	Total LKR ’000
Balance at beginning	19	–	19	19	2,296,775	2,296,794
Matured	–	–	–	–	(2,109,075)	(2,109,075)
Disposed	–	–	–	–	(187,700)	(187,700)
Exchange rate impact	–	–	–	–	–	–
Charge to income statement	496	–	496	–	–	–
Net remeasurement of loss allowance	–	–	–	–	–	–
Balance on 31 December	515	–	515	19	–	19

Loan commitments and financial guarantee contracts

	2025				2024
	Stage 1 LKR ’000	Stage 2 LKR ’000	Stage 3 LKR ’000	Total LKR ’000	Stage 1 LKR ’000	Stage 2 LKR ’000	Stage 3 LKR ’000	Total LKR ’000
Balance at beginning	713,480	108,915	685,573	1,507,968	625,189	81,149	–	706,338
Net remeasurement of loss allowance	15,536	(23,595)	(199,487)	(207,546)	88,291	27,766	685,573	801,630
Balance as at 31 December	729,016	85,320	486,086	1,300,422	713,480	108,915	685,573	1,507,968

8.2.5.2 Sensitivity of ECL to Future Economic Conditions

The ECL is sensitive to judgements and assumptions made regarding formulation of forward looking scenarios and how such scenarios are incorporated into the calculations. Management performs a sensitivity analysis on the ECL recognised on material classes of its assets.

Sensitivity of factors used to determine impairment provisions

Despite the impact of Cyclone Ditwah toward the end of 2025, the broader operating environment remained more stable and predictable compared to the heightened volatility experienced in prior periods. Accordingly, the Bank assessed expected credit losses based on a normalised macroeconomic outlook, incorporating only the specific adjustment required to reflect the effects of the cyclone and excluding any additional extraordinary or crisis driven scenarios.

With the stabilisation of key economic variables, the level of estimation uncertainty underlying the ECL measurement has moderated, reducing the degree of judgement previously required when applying severe downside assumptions. While certain risks continue to persist due to global developments and borrower specific conditions, the allowance recognised represents management’s best estimate under a base case environment. This estimate is derived using a consistent and prudent approach to forward looking information within a more stable range of potential outcomes.

The table below shows the sensitivity of the impairment provision of the Bank as at 31 December 2025 to a reasonably possible change in PDs, LGDs, and forward-looking information.

	Sensitivity effect on statement of financial position increase/(decrease) in impairment provision				Sensitivity effect on income statement LKR ’000
	Stage 1 LKR ’000	Stage 2 LKR ’000	Stage 3 LKR ’000	Total LKR ’000	Sensitivity effect on income statement LKR ’000
PD 5% increase across all age buckets	181,104	167,517	–	348,621	326,136
PD 5% decrease across all age buckets	(181,104)	(167,517)	–	(348,621)	(326,136)
LGD 5% increase	169,056	157,080	345,438	671,574	671,574
LGD 5% decrease	(169,056)	(157,080)	(345,438)	(671,574)	(671,574)
Worst case 5% decrease and best case 5% Increase	(125,046)	(97,856)	–	(222,902)	(222,902)
Worst case 5% Increase and best case 5% decrease	106,478	87,065	–	193,543	193,543

Credit Impaired Financial Assets

The following table sets out a reconciliation of changes in the net carrying amount of credit impaired loans and advances to customer.

As at 31 December	2025 LKR ’000	2024 LKR ’000
Credit Impaired loans and advances to customer at the beginning	68,606,773	71,341,320
Classified as credit impaired during the year	11,933,241	12,839,318
Transferred to not credit impaired during the year and settlements	(5,385,256)	(12,806,901)
Write-off during the year	(2,820,060)	(2,955,214)
Exchange rate impact and interest accrual	1,425,926	188,250
Credit impaired loans and advances to customers at 31 December	73,760,624	68,606,773

8.2.6 Concentration of Credit Risk – Bank

The Group monitors concentration of credit risk by sector and geographic location. An analysis on concentration of credit risk from loans and advances recorded at amortised cost and fair value through other comprehensive income, loan commitments, financial guarantees, and investments is shown below:

	Loans and advances to customers		Investments*		Loan commitments and financial guarantees issued
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Gross carrying amount	563,596,532	440,906,944	256,219,966	235,411,880	–	–
Amount committed/guaranteed	–	–	–	–	192,165,816	138,933,402
Concentration by sector
Agriculture, forestry, and fishing	53,727,183	49,197,555	–	–	15,220,795	12,212,652
Manufacturing	94,423,674	88,681,535	–	–	49,234,662	33,022,109
Tourism	17,012,462	18,595,720	–	–	1,414,059	1,487,177
Transportation and storage	12,433,282	11,338,122	–	–	3,512,815	2,767,964

	Loans and advances to customers		Investments*		Loan commitments and financial guarantees issued
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Construction	43,746,801	34,847,510	–	–	15,455,244	14,337,047
Infrastructure development	35,510,340	33,449,191	–	–	8,924,788	8,405,552
Wholesale and retail trade	109,514,398	76,185,140	–	–	63,888,280	38,850,965
Information technology and communication services	6,324,402	4,772,162	–	–	2,210,465	2,526,982
Financial services	36,368,360	23,112,645	47,526,150	14,464,356	12,739,090	6,295,734
Professional, scientific, and technical activities	4,010,686	1,888,835	–	–	12,200	739,487
Arts, entertainment, and recreation	1,407,197	758,288	–	–	532,778	313,984
Education	4,007,600	3,932,564	–	–	342,417	80,668
Health care, social services, and support services	8,086,893	6,791,644	–	–	4,117,594	2,542,316
Consumption	100,809,016	69,052,896	–	–	14,342,142	15,350,766
Lending to overseas entities**	36,214,238	18,303,137	–	–	530	–
Government	–	–	207,124,387	220,352,235	217,958	–
Other	–	–	1,569,429	595,289	–	–
Total	563,596,532	440,906,944	256,219,966	235,411,880	192,165,817	138,933,402

* Investments include Government of Sri Lanka Treasury Bills, Treasury Bonds, Sovereign Bonds, Debentures, Placements with Banks, and Balances held with Banks.

** Lending to overseas entities include loan and advances to customers at fair value through other comprehensive income. (refer Note 33.1.3)

8.2.7 Offsetting Financial Assets and Financial Liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when the Group currently has a legally enforceable right to set off the amounts, and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

8.3 Liquidity Risk

Liquidity risk represents the possibility that the Bank may face constraints in fulfilling its obligations arising from financial liabilities as they become due, where settlement is required in cash or other financial assets. This risk is driven by inherent mismatches in the timing and magnitude of cash inflows and outflows associated with the Bank’s operational and investment activities.

8.3.1 Management of Liquidity Risk

The Bank’s Board of Directors establishes the overall strategy for liquidity risk management, with oversight of its implementation delegated to the Assets and Liability Management Committee (ALCO). ALCO is responsible for approving the Bank’s liquidity risk

policies and procedures. The Treasury function manages the Bank’s liquidity position on a day to day basis and review daily liquidity reports for both the Bank and its operating subsidiaries. A consolidated report, highlighting any exceptions and corresponding remedial actions, is submitted to ALCO on a monthly basis or on an ad hoc basis when predefined thresholds are breached.

The Bank’s liquidity management approach is designed to ensure that it maintains adequate liquidity at all times to meet its obligations as they fall due, under both normal and stressed market conditions, without incurring unacceptable losses or compromising the Bank’s reputation. The principal components of the Bank’s liquidity strategy include the following:

Monitoring maturity mismatches, the behavioural characteristics of the Bank’s financial assets and liabilities, and the degree to which the Group’s assets are encumbered and therefore unavailable as potential collateral for funding purposes.
Monitoring the Bank’s liquidity position through the Liquidity Coverage Ratio and the Net Stable Funding Ratio using a stock-based approach, while ensuring compliance with regulatory requirements. Both ratios are closely monitored and subjected to stress testing under various scenarios to assess resilience under adverse conditions.
Effecting threshold limits relevant for liquidity management as part of the overall risk limits system of the Bank.
Carrying a portfolio of highly liquid assets, diversified by currency and maturity.

8.3.2 Exposure to Liquidity Risk – Regulatory Liquidity (Bank)

As at 31 December	2025	2024
Liquidity coverage ratio (minimum requirement 100%)
All currencies (%)	184.06	280.26
Rupee only (%)	190.90	310.01

8.3.3 Maturity Analysis for Financial Liabilities and Financial Assets

The following tables set out the remaining contractual maturities of the Bank’s financial liabilities and financial assets.

	BANK
As at 31 December 2025	Carrying amount LKR ’000	Gross nominal amount LKR ’000	Up to 3 months LKR ’000	3 to 12 months LKR ’000	1 to 3 years LKR ’000	3 to 5 years LKR ’000	More than 5 years LKR ’000	Total LKR ’000
Financial liabilities by type
Non-derivative liabilities
Due to banks	12,372,311	12,372,955	10,792,244	1,580,711	–	–	–	12,372,955
Financial liabilities at amortised cost – Due to depositors	564,758,931	568,175,372	169,612,526	207,400,614	122,989,126	33,902,170	34,270,936	568,175,372
Financial liabilities at amortised cost – Due to other borrowers	134,354,757	134,567,445	68,431,396	34,486,680	24,492,243	5,017,257	2,139,869	134,567,445
Debt securities issued	12,286,859	12,294,894	2,434,272	107,543	2,641,736	7,111,343	–	12,294,894
Other liabilities	8,298,358	8,306,394	4,890,131	1,479,738	473,914	788,668	673,943	8,306,394
Subordinated term debt	9,363,299	9,366,295	1,168,649	516	197,168	7,945,192	54,770	9,366,295
	741,434,515	745,083,355	257,329,218	245,055,802	150,794,187	54,764,630	37,139,518	745,083,355
Derivative financial liabilities	201,000	201,000	122,858	78,142	–	–	–	201,000
	201,000	201,000	122,858	78,142	–	–	–	201,000
Financial assets by type
Non-derivative assets
Cash and cash equivalents	22,771,091	22,771,091	22,771,091	–	–	–	–	22,771,091
Balances with Central Bank of Sri Lanka	2,952,879	2,952,879	2,952,879	–	–	–	–	2,952,879
Placements with banks	37,442,912	37,443,082	36,645,668	797,414	–	–	–	37,443,082
Financial assets measured at fair value through profit or loss	9,015,005	9,015,219	183,795	296,621	1,216,917	1,123,918	6,193,968	9,015,219
Financial assets at amortised cost – Loans and advances to customers	510,924,245	558,990,709	123,489,359	147,392,510	139,358,765	43,036,399	105,713,676	558,990,709
Financial assets measured at fair value through other comprehensive income – Loans and advances to customers	4,619,866	4,647,334	–	–	–	4,647,334	–	4,647,334
Financial assets at amortised cost – Debt and other instruments	114,795,690	115,513,000	2,847,037	16,993,347	50,027,699	42,499,180	3,145,737	115,513,000
Financial assets measured at fair value through other comprehensive income	124,552,817	124,672,334	15,630,353	13,216,449	32,799,292	25,755,008	37,271,232	124,672,334
Other assets	6,198,600	6,302,149	4,274,413	565,859	227,212	160,166	1,074,499	6,302,149
	833,273,105	882,307,797	208,794,595	179,262,200	223,629,885	117,222,005	153,399,112	882,307,797
Derivative financial assets	8,494,001	8,494,001	1,286,282	2,181,932	5,025,787	–	–	8,494,001
	8,494,001	8,494,001	1,286,282	2,181,932	5,025,787	–	–	8,494,001

The table below shows the contractual expiry by maturity of the Bank’s contingent liabilities and commitments.

	BANK
31 December 2025	Gross nominal amount LKR ’000	Up to 3 months LKR ’000	3 to 12 months LKR ’000	1 to 3 years LKR ’000	3 to 5 years LKR ’000	More than 5 years LKR ’000	Total LKR ’000
Documentary credit	38,918,184	28,906,392	9,161,763	850,029	–	–	38,918,184
Guarantees	32,100,806	2,458,957	11,778,042	11,052,169	6,201,985	609,653	32,100,806
Commitments for unutilised credit facilities	121,146,827	121,146,827	–	–	–	–	121,146,827
	192,165,817	152,512,176	20,939,805	11,902,198	6,201,985	609,653	192,165,817

The following tables set out the remaining contractual maturities of the Group’s financial liabilities and financial assets.

	Group
As at 31 December 2025	Carrying amount LKR ’000	Gross nominal amount LKR ’000	Up to 3 months LKR ’000	3 to 12 months LKR ’000	1 to 3 years LKR ’000	3 to 5 years LKR ’000	More than 5 years LKR ’000	Total LKR ’000
Financial liabilities by type
Non-derivative liabilities
Due to banks	12,372,311	12,372,955	10,792,244	1,580,711	–	–	–	12,372,955
Financial liabilities at amortised cost – Due to depositors	563,905,482	567,321,923	169,612,526	207,400,614	122,135,677	33,902,170	34,270,936	567,321,923
Financial liabilities at amortised cost – Due to other borrowers	134,363,917	134,567,445	68,431,396	34,486,680	24,492,243	5,017,257	2,139,869	134,567,445
Debt securities issued	12,286,859	12,294,894	2,434,272	107,543	2,641,736	7,111,343	–	12,294,894
Other liabilities	8,609,096	8,617,133	4,890,131	1,479,738	625,925	947,396	673,943	8,617,133
Subordinated term debt	9,363,299	9,366,295	1,168,649	516	197,168	7,945,192	54,770	9,366,295
	740,900,964	744,540,645	257,329,218	245,055,802	150,092,749	54,923,358	37,139,518	744,540,645
Derivative financial liabilities	201,000	201,000	122,858	78,142	–	–	–	201,000
	201,000	201,000	122,858	78,142	–	–	–	201,000
Financial assets by type
Non-derivative assets
Cash and cash equivalents	22,804,954	22,804,954	22,804,954	–	–	–	–	22,804,954
Balances with Central Bank	2,952,879	2,952,879	2,952,879	–	–	–	–	2,952,879
Placements with banks	37,442,912	37,443,082	36,645,668	797,414	–	–	–	37,443,082
Financial assets measured at fair value through profit or loss	9,015,005	9,015,219	183,795	296,621	1,216,917	1,123,918	6,193,968	9,015,219
Financial assets at amortised cost – loans to and receivables from other customers	510,924,245	558,990,709	123,489,359	147,392,510	139,358,765	43,036,399	105,713,676	558,990,709
Financial assets measured at fair value through other comprehensive income – loans and advances to customers	4,619,866	4,647,334	–	–	–	4,647,334	–	4,647,334
Financial assets at amortised cost – debt and other instruments	114,804,987	115,522,297	2,856,334	16,993,347	50,027,699	42,499,180	3,145,737	115,522,297

	Group
As at 31 December 2025	Carrying amount LKR ’000	Gross nominal amount LKR ’000	Up to 3 months LKR ’000	3 to 12 months LKR ’000	1 to 3 years LKR ’000	3 to 5 years LKR ’000	More than 5 years LKR ’000	Total LKR ’000
Financial assets measured at fair value through other comprehensive income	124,552,817	124,672,334	15,630,353	13,216,449	32,799,292	25,755,008	37,271,232	124,672,334
Other assets	6,373,793	6,456,422	4,428,686	565,859	227,212	160,166	1,074,499	6,456,422
	833,491,458	882,505,230	208,992,028	179,262,200	223,629,885	117,222,005	153,399,112	882,505,230
Derivative financial assets	8,494,001	8,494,001	1,286,282	2,181,932	5,025,787	–	–	8,494,001
	8,494,001	8,494,001	1,286,282	2,181,932	5,025,787	–	–	8,494,001

	BANK
As at 31 December 2024	Carrying amount LKR’000	Gross nominal amount LKR’000	Up to 3 months LKR’000	3 to 12 months LKR’000	1 to 3 years LKR’000	3 to 5 years LKR’000	More than 5 years LKR’000	Total LKR’000
Financial liabilities by type
Non-derivative liabilities
Due to banks	7,149,474	7,150,124	2,707,417	4,442,707	–	–	–	7,150,124
Financial liabilities at amortised cost – Due to depositors	465,153,180	468,607,412	145,645,429	177,191,717	84,295,893	32,670,253	28,804,120	468,607,412
Financial liabilities at amortised cost – Due to other borrowers	96,755,632	96,945,001	41,930,824	17,928,031	23,148,703	10,452,984	3,484,459	96,945,001
Debt securities issued	14,690,723	14,707,550	643,759	5,376,612	4,270,068	4,417,111	0	14,707,550
Other liabilities	7,441,320	7,562,141	5,478,943	234,799	505,933	1,342,466	0	7,562,141
Subordinated term debt	18,234,054	18,245,627	5,657,286	4,390,926	197,102	7,945,378	54,935	18,245,627
	609,424,383	613,217,855	202,063,658	209,564,792	112,417,699	56,828,192	32,343,514	613,217,855
Derivative financial liability	909,188	909,188	731,568	177,620	–	–	–	909,188
	909,188	909,188	731,568	177,620	–	–	–	909,188
Financial assets by type
Non-derivative assets
Cash and cash equivalents	13,504,806	13,504,806	13,504,806	–	–	–	–	13,504,806
Balances with Central Bank of Sri Lanka	2,328,346	2,328,346	2,328,346	–	–	–	–	2,328,346
Placements with banks	11,229,492	11,230,666	11,230,666	–	–	–	–	11,230,666
Financial assets measured at fair value through profit or loss	7,416,018	7,416,045	91,156	–	1,737,567	–	5,587,322	7,416,045
Financial assets at amortised cost – Loans and advances to banks	1,500,338	1,500,338	1,500,338	–	–	–	–	1,500,338
Financial assets at amortised cost – Loans and advances to customers	395,047,053	440,906,942	94,975,601	103,379,973	111,042,996	39,801,554	91,706,818	440,906,942
Financial assets at amortised cost – Debt and other instruments	105,641,690	106,471,513	3,449,246	14,223,667	32,946,847	42,298,279	13,553,474	106,471,513
Financial assets measured at fair value through other comprehensive income	138,258,226	138,408,940	6,740,122	65,039,763	39,732,220	2,249,702	24,647,133	138,408,940
Other assets	4,946,528	4,987,825	4,133,218	178,064	217,684	458,859		4,987,825
	679,872,497	726,755,421	137,953,499	182,821,467	185,677,314	84,808,394	135,494,747	726,755,421
Derivative financial assets	9,643,442	9,643,442	752,769	1,817,763	5,111,497	1,961,413	–	9,643,442
	9,643,442	9,643,442	752,769	1,817,763	5,111,497	1,961,413	–	9,643,442

	BANK
As at 31 December 2024	Carrying amount LKR’000	Gross nominal amount LKR’000	Up to 3 months LKR’000	3 to 12 months LKR’000	1 to 3 years LKR’000	3 to 5 years LKR’000	More than 5 years LKR’000	Total LKR’000
The table below shows the contractual expiry by maturity of the Bank's contingent liabilities and commitments.
		BANK
31 December 2024		Gross nominal amount LKR’000	Up to 3 months LKR’000	3 to 12 months LKR’000	1 to 3 years LKR’000	3 to 5 years LKR’000	More than 5 years LKR’000	Total LKR’000
Documentary credit		22,354,686	11,754,544	2,846,406	2,066,938	5,686,798	–	22,354,686
Guarantees		26,615,554	9,660,450	3,251,763	5,125,657	3,592,239	4,985,445	26,615,554
Commitments for unutilised credit facilities		89,963,162	89,963,162	–	–	–	–	89,963,162
		138,933,402	111,378,156	6,098,169	7,192,595	9,279,037	4,985,445	138,933,402

	GROUP
As at 31 December 2024	Carrying amount LKR’000	Gross nominal amount LKR’000	Up to 3 months LKR’000	3 to 12 months LKR’000	1 to 3 years LKR’000	3 to 5 years LKR’000	More than 5 years LKR’000	Total LKR’000
Financial Liabilities by type
Non-derivative liabilities
Due to banks	7,149,474	7,150,124	2,707,417	4,442,707	–	–	–	7,150,124
Financial liabilities at amortised cost – Due to depositors	464,359,564	468,607,412	145,645,429	177,191,717	84,295,893	32,670,253	28,804,120	468,607,412
Financial liabilities at amortised cost – Due to other borrowers	96,755,632	96,945,001	41,930,824	17,928,031	23,148,703	10,452,984	3,484,459	96,945,001
Debt securities issued	14,690,723	14,707,550	643,759	5,376,612	4,270,068	4,417,111	–	14,707,550
Other liabilities	7,719,982	7,840,804	5,556,944	291,039	640,934	1,351,887	–	7,840,804
Subordinated term debt	18,234,054	18,245,627	5,657,286	4,390,926	197,102	7,945,378	54,935	18,245,627
	608,909,429	613,496,518	202,141,659	209,621,032	112,552,700	56,837,613	32,343,514	613,496,518
Derivative financial liabilities	909,188	909,188	731,568	177,620	–	–	–	909,188
	909,188	909,188	731,568	177,620	–	–	–	909,188
Financial assets by type
Non-derivative assets
Cash and cash equivalents	13,523,475	13,523,475	13,523,475	–	–	–	–	13,523,475
Balances with Central Bank of Sri Lanka	2,328,346	2,328,346	2,328,346	–	–	–	–	2,328,346

	GROUP
As at 31 December 2024	Carrying amount LKR’000	Gross nominal amount LKR’000	Up to 3 months LKR’000	3 to 12 months LKR’000	1 to 3 years LKR’000	3 to 5 years LKR’000	More than 5 years LKR’000	Total LKR’000
Placements with banks	11,229,492	11,230,666	11,230,666	–	–	–	–	11,230,666
Financial assets measured at fair value through profit or loss	7,416,018	7,416,045	91,156	–	1,737,567	–	5,587,322	7,416,045
Financial assets at amortised cost – loans and advances to banks	1,500,338	1,500,338	1,500,338	–	–	–	–	1,500,338
Financial assets at amortised cost – loans and advances to customers	395,047,053	440,906,942	94,975,601	103,379,973	111,042,996	39,801,554	91,706,818	440,906,942
Financial assets at amortised cost – Debt and other instruments	105,701,871	106,471,513	3,449,246	14,223,667	32,946,847	42,298,279	13,553,474	106,471,513
Financial assets measured at fair value through other comprehensive income	138,258,226	138,408,940	6,740,122	65,039,763	39,732,220	2,249,702	24,647,133	138,408,940
Other assets	5,135,115	5,176,412	4,321,805	178,064	217,684	458,859	–	5,176,412
	680,139,934	726,962,677	138,160,755	182,821,467	185,677,314	84,808,394	135,494,747	726,962,677
Derivative financial assets	9,643,442	9,643,442	752,769	1,817,763	5,111,497	1,961,413	–	9,643,442
	9,643,442	9,643,442	752,769	1,817,763	5,111,497	1,961,413	–	9,643,442

Maturity Analysis of Total Assets and Total Liabilities

	Bank			Group
As at 31 December 2025	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000
Assets
Cash and cash equivalents	22,771,091	–	22,771,091	22,804,954	–	22,804 , 954
Balances with Central Bank	2,952,879	–	2,952,879	2,952,879	–	2,952,879
Placements with banks	37,442,912	–	37,442,912	37,442,912	–	37,442,912

	Bank			Group
As at 31 December 2025	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000
Derivative financial assets	3,468,214	5,025,787	8,494,001	3,468,214	5,025,787	8,494,001
Financial assets measured at fair value through profit or loss	480,202	8,534,803	9,015,005	480,202	8,534,803	9,015,005
Financial assets at amortised cost – Loans and advances to customers	258,893,835	252,030,410	510,924,245	258,893,835	252,030,410	510,924,245
Financial assets measured at fair value through other comprehensive income – loans and advances to customers	–	4,619,866	4,619,866	–	4,619,866	4,619,866
Financial assets at amortised cost – Debt and other instruments	19,123,074	95,672,616	114,795,690	26,664,080	88,140,907	114,804,987
Financial assets measured at fair value through other comprehensive income	28,727,285	95,825,532	124,552,817	28,727,285	95,825,532	124,552,817
Investment in subsidiaries	–	237,035	237,035	–	–	–
Investment in associate	–	33,169	33,169	–	41,876	41,876
Investment properties	–	9,879	9,879	–	598,166	598,166
Property, plant and equipment	–	4,508,724	4,508,724	–	4,777,359	4,777,359
Intangible assets	–	2,608,324	2,608,324	–	2,785,560	2,785,560
Deferred tax assets	–	5,731,675	5,731,675	–	5,745,154	5,745,154
Current tax assets	–	–	–	–	1,138	1,138
Asset held for Sale	–	–	–	–	–	–
Other assets	6,067,547	2,381,607	8,449,154	6,067,547	2,611,278	8,678,825
Total assets	379,927,039	477,219,427	857,146,466	387,501,908	470,737,836	858,239,744

	Bank			Group
As at 31 December 2025	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000
Liabilities
Due to banks	12,372,311	–	12,372,311	12,372,311	–	12,372,311
Derivative financial liabilities	201,000	–	201,000	201,000	–	201,000
Financial liabilities at amortised cost – Due to depositors	376,914,088	187,844,843	564,758,931	376,914,088	186,991,394	563,905,482
Financial liabilities at amortised cost – Due to other borrowers	102,705,388	31,649,369	134,354,757	102,705,388	31,658,529	134,363,917
Debt securities issued	2,533,780	9,753,079	12,286,859	2,533,780	9,753,079	12,286,859
Retirement benefit obligations	–	1,182,185	1,182,185	–	1,220,570	1,220,570
Current tax liability	2,669,112	–	2,669,112	2,757,706	–	2,757,706
Deferred tax liability	–	–	–	–	54,628	54,628
Other liabilities	8,705,043	3,840,196	12,545,239	8,705,043	4,313,740	13,018,783
Subordinated term debt	1,166,169	8,197,130	9,363,299	1,166,169	8,197,130	9,363,299
Total shareholders' equity	–	107,412,773	107,412,773	–	108,117,702	108,117,702
Non-controlling interest	–	–	–	–	577,487	577,487
Total equity and Liabilities	507,266,891	349,879,575	857,146,466	507,355,485	350,884,259	858,239,744
Maturity gap	(127,339,852)	127,339,852	–	(119,853,577)	119,853,577	–
Cumulative gap	(127,339,852)	–		(119,853,577)	–

	Bank			Group
As at 31 December 2024	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000
Assets
Cash and cash equivalents	13,504,806	–	13,504,806	13,523,475	–	13,523,475
Balances with Central Bank of Sri Lanka	2,328,346	–	2,328,346	2,328,346	–	2,328,346
Placements with banks	11,229,492	–	11,229,492	11,229,492	–	11,229,492
Derivative financial assets	2,570,532	7,072,910	9,643,442	2,570,532	7,072,910	9,643,442
Financial assets measured at fair value through profit or loss	91,155	7,324,863	7,416,018	91,155	7,324,863	7,416,018
Financial assets at amortised cost – Loans and advances to banks	1,500,338	–	1,500,338	1,500,338	–	1,500,338
Financial assets at amortised cost – Loans and advances to customers	186,890,603	208,156,450	395,047,053	186,890,603	208,156,450	395,047,053
Financial assets at amortised cost – Debt and other instruments	17,560,964	88,080,726	105,641,690	17,560,964	88,140,907	105,701,871
Financial assets measured at fair value through other comprehensive income	71,682,694	66,575,532	138,258,226	71,682,694	66,575,532	138,258,226
Investment in subsidiaries	–	237,035	237,035	–	–	–
Investment in associate	–	33,169	33,169	–	38,597	38,597
Investment properties	–	9,879	9,879	–	490,069	490,069
Property, plant and equipment	–	3,872,654	3,872,654	–	4,080,706	4,080,706

	Bank			Group
As at 31 December 2024	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000	Within 12 months LKR ’000	More than 12 months LKR ’000	Total LKR ’000
Intangible assets and goodwill	–	2,001,636	2,001,636	–	2,170,201	2,170,201
Deferred tax assets	–	4,893,483	4,893,483	–	4,913,002	4,913,002
Current tax assets	–	–	–	–	2,010	2,010
Asset held for sale	–	755,000	755,000	–	5,480,475	5,480,475
Other assets	4,269,986	3,551,146	7,821,132	4,458,572	3,602,367	8,060,939
Total assets	311,628,916	392,564,483	704,193,399	311,836,171	398,048,089	709,884,260
Liabilities
Due to banks	7,149,474	–	7,149,474	7,149,474	–	7,149,474
Derivative financial liabilities	909,188	–	909,188	909,188	–	909,188
Financial liabilities at amortised cost – Due to depositors	322,504,949	142,648,231	465,153,180	322,837,146	141,522,418	464,359,564
Financial liabilities at amortised cost – Due to other borrowers	59,673,777	37,081,855	96,755,632	59,673,777	37,081,855	96,755,632
Debt securities issued	6,009,624	8,681,099	14,690,723	6,009,624	8,681,099	14,690,723
Retirement benefit obligations	–	1,409,232	1,409,232	–	1,450,966	1,450,966
Current tax liabilities	3,066,586	–	3,066,586	3,160,100	–	3,160,100
Deferred tax liabilities	–	–	–	–	96,804	96,804
Other liabilities	5,592,921	7,199,412	12,792,333	5,727,161	7,504,044	13,231,205
Subordinated term debt	10,040,902	8,193,152	18,234,054	10,040,902	8,193,152	18,234,054
Total shareholders’ equity	–	84,032,997	84,032,997	–	89,400,119	89,400,119
Non-controlling interest	–	–	–	–	446,431	446,431
Total equity and liabilities	414,947,421	289,245,978	704,193,399	415,507,372	294,376,888	709,884,260
Maturity gap	(103,318,505)	103,318,505	–	(103,671,201)	103,671,201	–
Cumulative gap	(103,318,505)	–	–	(103,671,201)	–	–

The amounts in the table above have been compiled as follows:

Type of financial instrument	Basis on which amounts are compiled
Non-derivative financial liabilities and financial assets	Undiscounted cash flows, which include estimated interest payments.
Issued financial guarantee contracts, and unrecognised loan commitments	Earliest possible contractual maturity. For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.
Derivative financial liabilities and financial assets held for risk management purposes	Contractual undiscounted cash flows. The amounts shown are the gross nominal inflows and outflows for derivatives that have simultaneous gross settlement (e.g. forward exchange contracts and currency swaps) and the net amounts for derivatives that are net settled.

Trading derivative liabilities and assets forming part of the Group’s proprietary trading operations that are expected to be closed out before contractual maturity.	Fair values at the date of the statement of financial position. This is because contractual maturities do not reflect the liquidity risk exposure arising from these positions. These fair values are disclosed in the "up to 3 months" column.
Trading derivative liabilities and assets that are entered into by the Bank with its customers	Contractual undiscounted cash flows. This is because these instruments are not usually closed out before contractual maturity and so the Group believes that contractual maturities are essential for understanding the timing of cash flows associated with these derivative positions.

The Bank’s expected cash flows on some financial assets and financial liabilities vary significantly from the contractual cash flows. The principal differences are as follows:

demand deposits from customers are expected to remain stable or increase;
unrecognised loan commitments are not all expected to be drawn down immediately;

8.3.4 Repurchase and Reverse Repurchase Transactions in Scripless Treasury Bonds and Scripless Treasury Bills

In accordance with Direction No. 1 of 2019 issued by the Central Bank of Sri Lanka, all Licensed Banks and Primary Dealers are required to disclose additional information pertaining to repurchase and reverse repurchase transactions carried out in scripless treasury bonds and scripless treasury bills.

8.3.4.1 Value of Securities Allocated for Repurchase and Reverse Repurchase Transactions

	2025 LKR ’000	2024 LKR ’000
Carrying Value of Securities Allocated for Repurchase Transactions	94,070,591	51,013,880
Market Value of Securities Received for Reverse Repurchase Transactions	209,135	6,303,215

8.3.4.2 Bank’s Policy on Haircuts for Repurchase and Reverse Repurchase Transactions

According to the Bank’s internal policies, haircut applicable for each maturity bucket as at 31 December 2025 is given below. The haircuts applied meet the minimum haircut requirements imposed by the Directive No. 1 of 2019.

Remaining term to maturity of the eligible security	Haircut (%)
Remaining term to maturity of the eligible security	Repurchase transactions	Reverse repurchase transactions
Up to 1 year	6	10
More than 1 year and up to 3 years	8	10
More than 3 years and up to 5 years	10	10
More than 5 years and up to 8 years	12	12
More than 8 years	14	14

8.3.4.3 Penalties imposed on the Bank for non-compliance

No penalties were imposed on the Bank for non-compliance with Direction No. 01 of 2019 issued by the Central Bank of Sri Lanka during the years ended December 31, 2025 and 2024

8.3.5 Liquidity Reserves

As part of the management of liquidity risk arising from financial liabilities, the Bank holds liquid assets comprising cash and cash equivalents, and debt securities issued by sovereigns, which can be readily sold to meet liquidity requirements. In addition, the Bank maintains agreed lines of credit with other banks and holds unencumbered assets eligible for use as collateral with central banks (these amounts are referred to as the “Bank’s liquidity reserves”).

The following table sets out the components of the Bank’s liquidity reserves.

As at 31 December	2025		2024
As at 31 December	Carrying amount LKR ’000	Fair Value LKR ’000	Carrying amount LKR ’000	Fair Value LKR ’000
Cash and cash equivalents	14,619,367	14,619,367	10,487,340	10,487,340
Balances with Central Bank of Sri Lanka	2,952,879	2,952,879	2,328,346	2,328,346
Unencumbered debt securities issued by sovereigns	114,840,565	114,087,958	170,151,042	178,339,251
Total liquidity reserves	132,412,811	131,660,204	182,966,728	191,154,937

8.3.6 Financial Assets Available to Support Future Funding

The following table sets out the availability of the Bank’s financial assets to support future funding.

		Encumbered		Unencumbered
	Note	Pledged as collateral LKR ’000	Other* LKR ’000	Available as collateral LKR ’000	Other** LKR ’000	Total LKR ’000
31 December 2025
Cash and cash equivalents	26	–	–	22,771,091	–	22,771,091
Balances with Central Bank of Sri Lanka	27	–	2,952,879	–	–	2,952,879
Placements with banks	28	–	–	37,442,912	–	37,442,912
Derivative financial assets	29	–	–	8,494,001	–	8,494,001
Financial assets measured at fair value through profit or loss	30	–	–	9,015,005	–	9,015,005
Financial asset at amortised cost – loans and advances to banks	31	–	–	–	–	–
Financial assets at amortised cost – loans and advances to customers	32	–	–	510,924,245	–	510,924,245
Financial assets at fair value through other comprehensive income – Loan and advance to customers	33	–	–	4,619,866	–	4,619,866
Financial assets at amortised cost – debt and other instruments	34	81,405,091	–	33,390,599	–	114,795,690
Financial assets measured at fair value through other comprehensive income	35	12,665,500	–	111,887,317	–	124,552,817
Other assets	42	–	–	–	6,198,600	6,198,600
Non-financial assets		–	–	–	15,379,360	15,379,360
Total assets		94,070,591	2,952,879	738,545,036	21,577,960	857,146,466

		Encumbered		Unencumbered
	Note	Pledged as collateral LKR ’000	Other* LKR ’000	Available as collateral LKR ’000	Other** LKR ’000	Total LKR ’000
31 December 2024
Cash and cash equivalents	26	–	–	13,504,806	–	13,504,806
Balances with Central Bank of Sri Lanka	27	–	2,328,346	–	–	2,328,346
Placements with banks	28	–	–	11,229,492	–	11,229,492
Derivative financial assets	29			9,643,442		9,643,442
Financial assets measured at fair value through profit or loss	30	–	–	7,416,018	–	7,416,018
Financial assets at amortised cost – loans and advances to banks	31	–	–	1,500,338	–	1,500,338
Financial assets at amortised cost – loans and advances to customers	32	–	–	395,047,053	–	395,047,053
Financial asset measured at fair value through other comprehensive income	33	–	–	–	–	–
Financial assets at amortised cost – debt and other instruments	34	44,781,623	–	60,860,067	–	105,641,690
Financial assets measured at fair value through other comprehensive income	35	6,232,257	–	132,025,969	–	138,258,226
Other assets	42	–	–	–	4,946,528	4,946,528
Non-financial assets		–	–	–	14,677,460	14,677,460
Total assets		51,013,880	2,328,346	631,227,185	19,623,988	704,193,399

* Represents assets that are not pledged but that the Group believes it is restricted from using to secure funding, for legal or other reasons.

** Represents assets that are not restricted for use as collateral, but that the Group would not consider readily available to secure funding in the normal course of business.

8.4 Market Risk

Market risk refers to the potential for losses resulting from adverse movements in market variables, including interest rates, equity prices, foreign exchange rates, and credit spreads. The Bank’s market risk management framework is designed to identify, measure, monitor, and control market risk exposures within approved risk appetite limits, thereby safeguarding the Bank’s solvency while optimising risk-adjusted returns.

8.4.1 Management of Market Risk

The Bank separates its exposure to market risks between trading and non-trading portfolios. Trading portfolios are mainly include positions arising from market making and proprietary position taking, together with financial assets and financial liabilities that are managed on a fair value basis and non-trading portfolios from positions arising from financial investments measured at fair value through other comprehensive income (FVOCI) and financial investments at amortised cost and from derivatives held for risk management purposes.

Overall oversight and authority for market risk management reside with the Board of Directors, exercised through the Board Integrated Risk Management Committee (BIRMC). Operational responsibility for the management of market risk is delegated to the Asset–Liability Committee (ALCO). Foreign exchange risk, equity risk, and interest rate risk are managed in accordance with the Bank’s approved risk appetite and prescribed limits.

The Bank employs a range of tools to monitor and limit market risk exposures. These are discussed below, separately for trading and non-trading portfolios.

The following table sets out the allocation of assets and liabilities subject to market risk between trading and nontrading portfolios.

31 December 2025			Market risk measure
31 December 2025	Note	Carrying amount LKR ’000	Trading portfolio LKR ’000	Non-trading portfolio LKR ’000
Assets subject to market risk
Cash and cash equivalents	26	22,771,091	–	22,771,091
Placements with banks	28	37,442,912	–	37,442,912
Derivatives financial assets	29	8,494,001	–	8,494,001
Financial assets measured at fair value through profit or loss	30	9,015,005	6,610,693	2,404,312
Financial asset at amortised cost – loans and advances to banks	31	–	–	–
Financial assets at amortised cost – loans and advances to customers	32	510,924,245	–	510,924,245
Financial assets measured at fair value through other comprehensive income – loan and advance to customers	33	4,619,866	–	4,619,866
Financial assets at amortised cost – debt and other instruments	34	114,795,690	–	114,795,690
Financial assets measured at fair value through other comprehensive income	35	124,552,817	–	124,552,817
Liabilities subject to market risk
Due to banks	44	12,372,311	–	12,372,311
Derivatives financial liabilities	29	201,000	–	201,000

31 December 2025			Market risk measure
31 December 2025	Note	Carrying amount LKR ’000	Trading portfolio LKR ’000	Non-trading portfolio LKR ’000
Financial liabilities at amortised cost – Due to depositors	45	564,758,931	–	564,758,931
Financial liabilities at amortised cost – Due to other borrowers	46	134,354,757	–	134,354,757
Debt securities issued	47	12,286,859	–	12,286,859
Subordinated term debt	51	9,363,299	–	9,363,299

31 December 2024			Market risk measure
31 December 2024	Note	Carrying amount LKR ’000	Trading portfolio LKR ’000	Non-trading portfolio LKR ’000
Assets subject to market risk
Cash and cash equivalents	26	13,504,806	–	13,504,806
Placements with banks	28	11,229,492	–	11,229,492
Derivatives financial assets	29	9,643,442	–	9,643,442
Financial assets measured at fair value through profit or loss	30	7,416,018	5,202,788	2,213,230
Financial assets at amortised cost - Loans and advances to banks	31	1,500,338	–	1,500,338
Financial assets at amortised cost – Loans and advances to customers	32	395,047,053	–	395,047,053
Financial asset measured at fair value through other comprehensive income – Loans and advances to customers	33	–	–	–
Financial assets at amortised cost – Debt and other instruments	34	105,641,690	–	105,641,690
Financial assets measured at fair value through other comprehensive income	35	138,258,226	–	138,258,226
Liabilities subject to market risk
Due to banks	44	7,149,474	–	7,149,474
Derivatives financial liabilities	29	909,188	–	909,188
Financial liabilities at amortised cost – Due to depositors	45	465,153,180	–	465,153,180
Financial liabilities at amortised cost – Due to other borrowers	46	96,755,632	–	96,755,632
Debt securities issued	47	14,690,723	–	14,690,723
Subordinated term debt	51	18,234,054	–	18,234,054

8.4.2 Exposure to Market Risk – Trading Portfolios

The principal tool used to measure and control market risk exposure within the Bank’s trading portfolios is Value at Risk (VaR). The VaR of a trading portfolio is the maximum estimated loss that can arise with a specified probability (confidence level) in the portfolio over a specified period of time (holding period) from an adverse market movement.

The VaR model used by the Bank is based on a 99% confidence level and assumes 1, 10, and 60-day holding periods (depending on product type). The VaR model used is based mainly on historical simulation. Taking account of market data, and observed correlation between different markets and prices, the model generates a wide range of plausible future scenarios for market price movements.

Although VaR is an important tool for measuring market risk, the assumptions on which the model is based give rise to some limitations, including the following:

It is assumed that, within the holding period it is possible to hedge or dispose of positions. This may not be the case for illiquid assets or in severe market liquidity situations.
A 99% confidence level does not reflect losses that may occur beyond this level. Even within the model used, there is a 1% probability that losses could exceed the VaR in any given period.
The calculated VaR does not reflect exposures that may arise on positions during the trading day.
The calculations are based on historical data as a basis for determining the possible range of future outcomes and does not cover all possible scenarios, especially those of an exceptional nature.
The VaR measure is dependent on the Bank’s position and the volatility of market prices. The VaR of an unchanged position reduces if market price volatility declines and vice versa.

The limitations of the VaR methodology are recognised by supplementing VaR limits with other position and sensitivity limit structures, including limits to address potential concentration risks within each trading portfolio. In addition, the Bank uses a wide range of stress tests to model the financial impact of a variety of exceptional market scenarios on individual trading portfolios and the Bank’s overall position. The Bank determines the scenarios as follows:

sensitivity scenarios consider the impact of any single risk factor or set of factors that are unlikely to be captured within the VaR models;
technical scenarios consider the largest move in each risk factor without consideration of any underlying market correlation; and
hypothetical scenarios consider potential macro-economic events – e.g. periods of prolonged market illiquidity, reduced fungibility of currencies, natural disasters or other catastrophes, health pandemics, etc.

The analysis of scenarios and stress tests is reviewed by ALCO.

8.4.2.1 Equity Price Risk

Equity price risk is a part of the market risk which is defined as the risk of possible losses arising from the equity market investments due to changes in the market price of the invested shares. The Bank is exposed to equity price risk through its investments in the equity market which has been shown in the FVPL portfolio and the FVOCI portfolio.

Financial assets measured at fair value through profit or loss portfolio

Parameter	Position as at 31 December 2025 LKR ’000	Position as at 31 December 2024 LKR ’000
Marked-to-market value of the total quoted equity portfolio	3,789,656	3,374,092
Value-at-risk (under 99% probability for a quarterly time horizon)	16.91%	17.28%
Maximum possible loss of value in the marked-to-market value of the portfolio as indicated by the VaR over a quarterly period	640,967	582,902
Unrealised gains in the equity FVTPL portfolio reported in the retained earnings	583,014	736,724

Equity price risk is quantified using the Value at Risk (VaR) approach based on the Historical Loss Method. Historical four-year portfolio returns is adopted to compute VaR as a measure of the equity prices risk exposure by the Bank. This VaR computation for the equity FVPL portfolio considers a quarterly time horizon

8.4.3 Exposure to Market Risk – Non-Trading Portfolios

Financial assets measured at fair value through other comprehensive income

Parameter	Position as at 31 December 2025 LKR ’000	Position as at 31 December 2024 LKR ’000
Marked-to-market value of the total quoted equity portfolio	31,212,665	24,293,516
Value-at-risk (under 99% probability for a quarterly time horizon)	25.86%	28.13%
Maximum possible loss of value in the marked-to-market value of the portfolio as indicated by the VaR over a quarterly period	8,070,212	6,834,414
Unrealised gains in the equity FVOCI portfolio reported in the fair value reserve	20,195,343	12,092,381

Equity price risk is quantified using the Value at Risk (VAR) approach based on the Historical Loss Method. Historical three-year portfolio returns is adopted to compute VAR as a measure of the equity prices risk exposure by the Bank. This VAR computation for the equity FVOCI portfolio considers a quarterly time horizon.

8.4.4 Interest Rate Risk

The Fair Value through Profit or Loss (FVPL) and Fair Value through Other Comprehensive Income (FVOCI) portfolios are primarily exposed to interest rate risk, which represents the potential for losses arising from adverse movements in market interest rates that affect the future cash flows and/or fair values of financial instruments.

Duration analysis as at 31 December 2025

Portfolio	Face value LKR ’000	Market value LKR ’000	Modified duration	Interpretation of duration
Government Securities measured at FVPL/LKR Bills and Bonds	2,603,058	2,821,036	2.11	Portfolio value will decline approximately by 2.11% as a result of 1% increase in the interest rates.
Government Securities measured at FVOCI/LKR Bills and Bonds	80,253,918	84,251,047	2.24	Portfolio value will decline approximately by 2.24% as a result of 1% increase in the interest rates.
US Government Securities measured at FVOCI/US Treasury Bonds	1,549,464	1,569,429	0.68	Portfolio value will decline approximately by 0.68% as a result of 1% increase in the interest rates.
Government Securities measured at FVOCI/USD International Sovereign Bonds	5,648,040	5,473,438	1.60	Portfolio value will decline approximately by 1.60% as a result of 1% increase in the interest rates.
Quoted Debenture at FVOCI/LKR	1,650,000	1,714,175	2.51	Portfolio value will decline approximately by 2.51% as a result of 1% increase in the interest rates.

The market risk exposure for interest rate risk in the FVPL Rupee portfolio as of 31 December 2025 is indicated by a modified duration of 2.11. This level of interest rate risk exposure in the Rupee FVPL portfolio suggests a potential loss in the marked-to-market value amounting to LKR 59.24 Mn as of 31 December 2025.

The market risk exposure for interest rate risk in the FVOCI Rupee portfolio and FVOCI US Treasuries portfolio as of 31 December 2025 is reflected in modified durations of 2.24 and 0.68 respectively. This level of interest rate risk exposure in the Rupee FVOCI portfolio and FVOCI US Treasuries portfolio may lead to potential losses in marked to-market value amounting to LKR 1.89 Bn and LKR 10.67 Mn respectively, as of 31 December 2025.

The market risk exposure for interest rate risk in the FVOCI International Sovereign Bond portfolio as of 31 December 2025 is indicated by a modified duration of 1.60. This level of interest rate risk exposure in the FVOCI International Sovereign Bond portfolio suggests a potential loss in the marked-to-market value amounting to LKR 87.57 Mn as of 31 December 2025.

The market risk exposure for interest rate risk in the FVOCI – Quoted Debenture portfolio as of 31 December 2025 is indicated by a modified duration of 2.51. This level of interest rate risk exposure in the FVOCI – Quoted Debenture portfolio suggests a potential loss in the marked-to-market value amounting to LKR 43.03 Mn as of 31 December 2025.

8.4.4.1 Potential Impact to NII due to Change in Market Interest Rates

Overall up to the 12-month time bucket, the Bank carried a net liability sensitive position. This sensitivity will vary for each time bucket up to the 12-month period where up to one month there are net asset sensitive positions.

The interest rate risk exposure as at 31 December 2025 is quantified based on the assumed change in the interest rates for each time period and is given in table below:

Interest Rate Risk Exposure Arising from Financial Assets and Financial Liabilities

31 December	2025
31 December	Over 0 up to 1 month LKR ’000	Over 1 up to 3 months LKR ’000	Over 3 up to 6 months LKR ’000	Over 6 up to 12 months LKR ’000	Over 12 months LKR ’000
Cash and cash equivalents	361,944	–	–	–	–
Placements with banks	33,146,960	3,498,538	–	315,982	–
Financial assets measured at fair value through profit or loss	144,374	39,083	8,496	288,248	2,340,835
Financial assets at amortised cost – loans and advances to customers	245,874,451	25,649,324	28,492,796	34,908,276	145,521,106
Financial assets measured at fair value through other comprehensive income – loans and advances to customers	–	–	–	–	4,619,866
Financial assets at amortised cost – debt and other instruments	818,513	1,593,039	17,273,028	1,614,295	93,496,815
Financial assets measured at fair value through other comprehensive income	11,032,634	4,494,688	4,701,629	8,756,943	64,022,197
	291,378,876	35,274,672	50,475,949	45,883,744	310,000,819
Due to banks	1,000,000	7,741,250	3,096,500	–	–

31 December	2025
31 December	Over 0 up to 1 month LKR ’000	Over 1 up to 3 months LKR ’000	Over 3 up to 6 months LKR ’000	Over 6 up to 12 months LKR ’000	Over 12 months LKR ’000
Financial liabilities at amortised cost – due to depositors	160,619,459	89,883,351	70,035,342	110,288,958	86,574,281
Financial liabilities at amortised cost – due to other borrowers	43,330,701	25,358,685	17,924,380	16,179,547	29,727,034
Debt securities issued	–	1,759,386	–	–	9,763,452
Subordinated term debt	–	–	–	–	8,192,833
	204,950,160	124,742,672	91,056,222	126,468,505	134,257,600
Net rate sensitive assets (liabilities)	86,428,716	(89,468,000)	(40,580,273)	(80,584,761)	175,743,219
Assumed change in interest rates (%)	0.50	1.00	1.50	2.00
Impact	432,144	(820,123)	(456,528)	(805,848)
Total net impact if interest rates increase	(1,650,355)
Total net impact if interest rates decline	1,650,355

31 December	2024
	Over 0 up to 1 month LKR ’000	Over 1 up to 3 months LKR ’000	Over 3 up to 6 months LKR ’000	Over 6 up to 12 months LKR ’000	Over 12 months LKR ’000
Cash and cash equivalents	204,107	–	–	–	–
Placements with banks	10,457,186	297,677	–	–	–
Financial assets measured at fair value through profit or loss	61,447	23,116	6,593	–	1,737,540
Financial assets at amortised cost – loans and advances to banks	1,500,338	–	–	–	–
Financial assets at amortised cost – Loans and advances to customers	150,458,026	55,268,447	22,966,380	31,789,811	111,817,505
Financial assets at amortised cost – Debt and other instruments	1,968,800	1,471,837	12,821,143	1,299,203	88,080,707

31 December	2024
	Over 0 up to 1 month LKR ’000	Over 1 up to 3 months LKR ’000	Over 3 up to 6 months LKR ’000	Over 6 up to 12 months LKR ’000	Over 12 months LKR ’000
Financial assets measured at fair value through other comprehensive income	2,492,757	3,839,705	31,271,210	17,713,405	58,377,439
	167,142,661	60,900,782	67,065,326	50,802,419	260,013,191
Due to banks	7,135,609	–	–	–	–
Financial liabilities at amortised cost – Due to depositors	134,139,528	87,771,237	77,848,272	80,629,995	67,048,344
Financial liabilities at amortised cost – Due to other borrowers	25,902,185	15,681,687	6,651,748	11,713,849	36,806,463
Debt securities issued	–	–	5,645,447	–	9,045,276
Subordinated term debt	–	5,635,605	–	4,318,000	8,280,449
	167,177,322	109,088,529	90,145,467	96,661,844	121,180,532
Net rate sensitive assets (liabilities)	(34,661)	(48,187,747)	(23,080,141)	(45,859,425)	138,832,659
Assumed change in interest rates (%)	0.50	1.00	1.50	2.00
Impact	(173)	(441,718)	(259,652)	(458,594)
Total net impact if interest rates increase	(1,160,137)
Total net impact if interest rates decline	1,160,137

The Bank has assumed that the assets and liabilities are repriced at the beginning of each time bucket and has also taken into account the remaining time from the repricing date up to one year.

8.4.5 Foreign Exchange Risk

Foreign exchange risk in net open position (NOP)/unhedged position of Bank

Foreign exchange risk in net open position (NOP)/unhedged position of Bank. The following table indicates the DFCC Bank’s exchange rate risk exposure based on the size of its NOP/unhedged positions in foreign currency assets/liabilities. By 31 December 2025, DFCC carried a net open/unhedged “long” position of USD 3.385 Mn. The impact of exchange rate risk is given below:

	2025 Amount	2024 Amount
Net exposure – USD equivalent (As per CBSL Reporting)	3,385,000	(7,938,000)
Value of position in LKR ’000	1,048,165	(2,329,009)
Exchange rate (USD/LKR) as at 31 December	309.65	293.40
Possible potential loss to Bank – LKR 000
– If exchange rate (USD/LKR) appreciates by 1%	(10,482)	(23,290)
– If exchange rate depreciates by 10%	(104,817)	(232,901)
– If exchange rate depreciates by 15%	(157,225)	(349,351)

The estimated potential exchange loss is off set by the interest gain due to interest differential between Sri Lankan Rupee and the respective foreign currencies.

8.4.6 Market Risk Exposures for Regulatory Capital Assessment

Under the standardised approach of Basel III with effect from July 2017, market risk exposures are quantified for regulatory capital purposes. The computation results as at 31 December 2025 are as follows:

	Risk-weighted assets LKR ’000	Quantified possible exposure LKR ’000
Interest rate risk	90,232	721,856
Equity price risk	1,265,026	10,120,208
Foreign exchange and gold risk	340,936	2,727,488
Total	1,696,194	13,569,552

8.5 Operational Risk

“Operational risk” is the risk of direct or indirect loss arising from a wide variety of causes associated with the Bank’s processes, personnel, technology, infrastructure, and external factors other than credit, market and liquidity risks-e.g. those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Bank’s operations.

The Bank’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Bank’s reputation with overall cost effectiveness and innovation. In all cases, Bank’s policy requires compliance with all applicable legal and regulatory requirements.

The following are included in the process of the operational risk management in the Bank.

Monitoring of the Key Risk Indicators (KRIs) for departments/functions under the defined threshold limits using a traffic light system. Develop Risk and Control Self-Assessments to identify the risk exposure of all processes. Key Risk Indicator (KRI) monitoring for branches focuses on identifying risks, tracking trends, and ensuring timely corrective actions to mitigate threats.
Operational risk incident reporting system and the independent analysis of the incidents by the IRMD, and recognising necessary improvements in the systems, processes and procedures.
Analyse downtime of the critical systems, attrition information, exit interview comments and complaints to identify operational risks and recommend mitigating controls. Key findings of the analysis are evaluated at the ORSC, ORMC and the BIRMC meetings from an operational risk perspective.

The primary responsibility for the recommendation of controls to address operational risk lies with IRMD whilst implementation of controls is assigned to Senior Management within each business unit. Operational Risk Coordinating Officers are appointed within each department/branch to assist in managing the operational risk. This responsibility is supported by the development of overall standards for management of operational risk in the following areas:

Requirements for appropriate segregation of duties, including independent authorisation of transactions.
Requirements for reconciliation and monitoring of transactions.
Compliance with regulatory and other legal requirements.
Documentation of controls and procedures.
Requirements for periodic assessment of operational risks faced and the adequacy of controls and procedures to address the identified risks.
Requirements for reporting of operational losses and proposed remedial action.
Development of contingency plans.
Training and professional development to establish ethics and business standards.

Insurance covering risk due to threats arising from external and other events.

Compliance with the Bank’s standards is supported by a programme of periodic reviews undertaken by internal audit. The results of internal audit reviews are discussed with the business unit to which they relate, with summaries submitted to the Audit Committee and senior management.

Group operational risk assessments are conducted at the Board level.

8.6 Capital Management

The Bank manages its capital at Bank and Group level considering both regulatory requirement and risk exposures. Its regulatory capital position is analysed by the BIRMC periodically and recommendations and decisions are made accordingly. The Group capital management goals are as follows:

Ensure regulatory minimum capital adequacy requirements are not compromised.
Bank to maintain its international and local credit ratings and to ensure that no downgrading occurs as a result of deterioration of risk capital of the Bank other than in an extreme change in external operating environment.
Ensure capital impact of business decisions including strategic business plans are properly assessed and taken in to consideration.
Ensure capital consumption by business actions are adequately priced.
Optimising ROE

Central Bank of Sri Lanka sets and monitors regulatory capital requirement on both consolidated and solo basis. The Bank currently uses the standardised approach for credit risk and market risk and basic indicator approach for operational risk.

The Basel III capital regulations, which are currently in force, will continue to be based on the three-mutually reinforcing pillars introduced under Basel II, i.e. minimum capital requirement, supervisory review process and market discipline. Basel III focuses on increasing the quality and quantity of capital especially the core capital, through redefining the common equity capital and introducing new capital buffers such as the Capital Conservation Buffer and a Capital Surcharge on domestic systematically important banks. DFCC Bank started reporting capital computations under the Basel III requirements from mid 2017 as per the regulatory requirements.

Regulatory capital comprises Tier 1 capital and Tier 2 capital. The Bank’s policy is to maintain a strong capital base so as to ensure investor, creditor, and market confidence to sustain future development of the business. DFCC Bank and its Group have complied with the minimum capital requirements imposed by the Central Bank of Sri Lanka throughout the year.

8.6.1 Key Regulatory Ratios – Capital Adequacy

31 December	2025		2024
Item	Bank	Group	Bank	Group
Regulatory capital (LKR ’000)
Common equity Tier 1	68,302,317	68,840,059	52,485,838	57,804,406
Tier 1 capital	68,302,317	68,840,059	52,485,838	57,804,406
Total capital	80,318,596	80,869,103	66,693,851	72,021,286
Regulatory capital ratios (%)
Common equity Tier 1 capital ratio (minimum requirement – 7.0%)	13.55%	13.61%	12.40%	13.61%
Tier 1 capital ratio (minimum requirement – 8.5%)	13.55%	13.61%	12.40%	13.61%
Total capital ratio (minimum requirement – 12.5%)	15.93%	15.99%	15.76%	16.96%

Basel III computation of capital ratios

31 December	2025		2024
Item	Bank LKR ’000	Group LKR ’000	Bank LKR ’000	Group LKR ’000
Common equity Tier 1 (CET 1) capital after adjustments	68,302,317	68,840,059	52,485,838	57,804,406
Common equity Tier 1 (CET 1) capital	86,605,232	88,474,933	71,009,611	77,842,985
Equity capital (stated capital)/assigned capital	15,445,973	15,445,973	14,710,454	14,710,454
Reserve fund	4,459,968	4,459,968	3,657,968	3,657,968
Published retained earnings/(accumulated retained losses)	50,291,230	52,160,931	35,834,730	42,668,104
Published accumulated other comprehensive income (OCI)	2,628,222	2,628,222	3,026,620	3,026,620
General and other disclosed reserves	13,779,839	13,779,839	13,779,839	13,779,839
Unpublished current year’s profit/loss and gains reflected in OCI	–	–	–	–
Ordinary shares issued by consolidated banking and financial subsidiaries of the Bank and held by third parties	–	–	–	–
Total adjustments to CET1 capital	18,302,915	19,634,874	18,523,773	20,038,579
Goodwill (net)	–	156,226	–	156,226
Intangible assets (net)	2,608,324	2,629,334	2,001,636	2,013,975
Investment in capital of banks and financial institutions	9,614,906	10,756,150	11,180,665	12,507,386

31 December	2025		2024
Item	Bank LKR ’000	Group LKR ’000	Bank LKR ’000	Group LKR ’000
Others	6,079,685	6,093,164	5,341,472	5,360,992
Additional Tier 1 (AT1) capital after adjustments
Additional Tier 1 (AT1) capital
Qualifying additional Tier 1 capital instruments	–	–	–	–
Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties	–	–	–	–
Total adjustments to AT1 capital
Investment in own shares	–	–	–	–
Others (specify)	–	–	–	–
Tier 2 capital after adjustments	12,016,278	12,029,043	14,208,013	14,216,880
Tier 2 capital	12,046,811	12,058,079	14,208,013	14,216,880
Qualifying Tier 2 capital instruments	6,492,954	6,492,954	9,803,906	9,803,906
Revaluation gains	–	–	–	–
Stage 1 & 50% of stage 2 impairment provision subject to 1.25% of credit RWA	5,553,857	5,565,125	4,404,107	4,412,974
Total adjustments to Tier 2	30,533	29,036
Investment in own shares	–	–	–	–
Investments in financial institutions where the bank holds less than 10% of the voting capital.	30,533	29,036	–	–
CET1 capital	68,302,317	68,840,059	52,485,838	57,804,406
Total Tier 1 capital	68,302,317	68,840,059	52,485,838	57,804,406
Total capital	80,318,596	80,869,103	66,693,851	72,021,286
Total risk-weighted assets (RWA)	504,089,106	505,794,586	423,201,054	424,683,050
RWAs for credit risk	444,308,578	445,210,025	352,328,550	353,037,904
RWAs for market risk	13,569,552	13,569,552	27,403,720	27,403,720
RWAs for operational risk	46,210,976	47,015,009	43,468,734	44,241,426
CET1 Capital Ratio (including Capital Conservation Buffer, Countercyclical Capital Buffer, and Surcharge on D-SIBs) (%)	13.55	13.61	12.40	13.61
of which: Capital Conservation Buffer (%)	2.50	2.50	2.50	2.50
of which: Countercyclical Buffer (%)	N/A	N/A	N/A	N/A
of which: Capital Surcharge on D-SIBs (%)	N/A	N/A	N/A	N/A
Total Tier 1 Capital Ratio (%)	13.55	13.61	12.40	13.61
Total Capital Ratio (including Capital Conservation Buffer, Countercyclical Capital Buffer and Surcharge on D-SIBs) (%)	15.93	15.99	15.76	16.96
of which: Capital Conservation Buffer (%)	2.50	2.50	2.50	2.50
of which: Countercyclical Buffer (%)	N/A	N/A	N/A	N/A
of which: Capital Surcharge on D-SIBs (%)	N/A	N/A	N/A	N/A

Accounting Policy

See accounting policy in Note 5.3.7.

9.1 Valuation Models

The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurements.

Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.

Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs that are not observable and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for which observable market prices exist, and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premiums used.

In estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

The Group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments, like government securities, interest rate and currency swaps that use mostly observable market data and require little management judgment and estimation. Observable prices and model inputs are usually available in the market for listed debt and equity securities, government securities and simple over the counter derivatives like forward exchange contracts and interest rate swaps. Availability of observable market prices and model inputs reduces the need for management judgment and estimation and also reduces the uncertainty associated with determination of fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.

Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Group believes that a third party market participant would take them into account in pricing a transaction.

Model inputs and values are calibrated against historical data and published forecasts and, where possible, against current or recent observed transactions in different instruments and against broker quotes. This calibration process is inherently subjective and it yields ranges of possible inputs and estimates of fair value, and management uses judgement to select the most appropriate point in the range.

9.2 Valuation Framework

The established control framework with respect to the measurement of fair values, includes an oversight which is independent of front office management. Treasury Middle Office has overall responsibility for independently verifying the results of trading and investment operation.

Specific controls include:

Verification of observable pricing
Review and approval process for new models and changes to models involving both product control and group market risk
Calibration and back testing of models
Stress testing

When third party information, such as broker quotes or pricing services is used to measure fair value, the evidence so obtained to support the conclusion that such valuations meet the requirements of SLFRSs/LKASs is documented.

This includes:

Verifying that the broker or pricing service is approved by the Bank for use in pricing the relevant type of financial instrument
Several quotes obtained from randomly selected brokers for the same financial instrument and the fair value determined on this basis

Any changes to the fair value methodology is reported to the Bank’s Audit Committee.

9.3 Financial Instruments Measured at Fair Value – Fair Value Hierarchy

The following table analyses financial instruments measured at fair value at the reporting date, by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial position. The fair values include any deferred differences between the transaction price and the fair value on initial recognition when the fair value is based on a valuation technique that uses unobservable inputs.

A. Bank/Group

As at 31 December		2025
	Note	Level 1 LKR ’000	Level 2 LKR ’000	Level 3 LKR ’000	Total LKR ’000
Financial assets
Derivative financial assets
Forward foreign exchange contracts	29	–	8,494,001	–	8,494,001
Financial assets measured at fair value through profit or loss
Government of Sri Lanka Treasury Bills and Bonds	30	2,821,037	–	–	2,821,037
Equity securities – quoted		3,789,656	–	–	3,789,656
Units in unit trusts – unquoted		–	2,404,312	–	2,404,312
Financial assets measured at fair value through other comprehensive income – Loan and receivables from other customers	33	–	4,619,866	–	4,619,866
Financial assets measured at fair value through other comprehensive income	35
Government of Sri Lanka Treasury Bills and Bonds		89,724,485	–	–	89,724,485
US Treasury Bond		1,569,429	–	–	1,569,429
Debentures		–	1,714,175	–	1,714,175
Equity shares – quoted		31,212,665	–	–	31,212,665
Equity shares – unquoted		–	–	332,063	332,063
		129,117,272	17,232,354	332,063	146,681,689
Financial liabilities

As at 31 December		2025
	Note	Level 1 LKR ’000	Level 2 LKR ’000	Level 3 LKR ’000	Total LKR ’000
Derivative financial liabilities	29
Forward foreign exchange contracts		–	201,000	–	201,000
		–	201,000	–	201,000

As at 31 December		2024
	Note	Level 1 LKR ’000	Level 2 LKR ’000	Level 3 LKR ’000	Total LKR ’000
Financial assets
Derivative financial assets	29
Forward foreign exchange contracts		–	9,643,442	–	9,643,442
Financial assets measured at fair value through profit or loss	30
Government of Sri Lanka Treasury Bills and Bonds		1,828,696	–	–	1,828,696
Equity securities – quoted		3,374,092	–	–	3,374,092
Units in unit trusts – quoted		–	2,213,230	–	2,213,230
Financial assets measured at fair value through other comprehensive income	35
Government of Sri Lanka Treasury Bills and Bonds		113,099,228	–	–	113,099,228
US Treasury Bond		595,289	–	–	595,289
Equity shares – quoted		24,293,516	–	–	24,293,516
Equity shares – unquoted		–	–	270,193	270,193
		143,190,821	11,856,672	270,193	155,317,686
Financial liabilities
Derivative financial liabilities	29
Forward foreign exchange contracts		–	909,188	–	909,188
		–	909,188	–	909,188

As Treasury Bills/Bonds are valued using Central Bank published rates, investments in Treasury Bills/Bonds are classified under Level 1. Other securities which are listed in the Colombo Stock Exchange are also classified as a Level 1 asset by referring to the quoted prices. US Treasury Bonds valued using Bloomberg published rates. Debentures are valued using Government Securities market rates (incorporating counterparty risk adjustments and market premium based on the debenture issue date.)

9.3.1 Valuation Techniques and Significant Unobservable Inputs

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values for financial instruments in the statement of financial position, as well as the significant unobservable inputs used.

Type	Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value measurement
Unquoted equity shares	Net asset approach: The fair value is determining based on the net assets value of the unquoted equity share	Net assets value per share	The estimated fair value would increase/(decrease) if the adjusted net assets value per share were higher/(lower)

9.3.2 Transfers between Levels 1 and 2

There were no transfers from Level 1 to 2 or Level 2 to 1 in 2025.

9.3.3 Level 3 Recurring Fair Values

9.3.3.1 Reconciliation of Level 3 Fair Values

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values:

	Equity securities
	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	270,193	237,985
Net change in fair value (unrealised)	61,870	32,208
Balance at 31 December	332,063	270,193

9.3.3.2 Transfer Out of Level 3

There were no transfers out of Level 3 and 2 in 2025.

9.3.3.3 Sensitivity Analysis

For the fair values of equity securities, reasonably possible changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects:

	OCI, net of tax
As at 31 December	2025
	Increase LKR ’000	Decrease LKR ’000
Equity securities
Adjusted net assets value (5% movement)	16,603	(16,603)

Accounting judgements, estimates and assumptions

Where the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, those are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but if this is not available, judgement to establish fair values. The valuation of financial instruments is described in more detail in Note 4 to the financial statements.

The Group evaluates the material accuracy of the valuations incorporated in the financial statements as they can involve a high degree of judgement and estimation in determining the carrying values of financial assets and financial liabilities at the reporting date.

For certain financial instruments, the Group may use data that is not readily observable in current markets. If we use unobservable market data, then more judgement is exercised to determine fair value depending on the significance of the unobservable input to the overall valuation. Generally, unobservable inputs are derived from other relevant market data and compare them to observed transaction prices where available.

When establishing the fair value of a financial instrument using a valuation technique, the Group considers valuation adjustments in determining the fair value. The Group may apply adjustments (such as bid/offer spreads, credit valuation adjustments and funding valuation adjustments.)

refer Note 29 Derivative Financial Instruments) to reflect the Group’s assessment of factors that market participants would consider in setting fair value.

9.4 Financial Instruments not Measured at Fair Value

The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised:

A. Bank

31 December		2025
	Note	Level 1 LKR ’000	Level 2 LKR ’000	Level 3 LKR ’000	Fair value LKR ’000	Carrying amount LKR ’000
Assets
Cash and cash equivalents	26	–	22,771,091	–	22,771,091	22,771,091
Balances with Central Bank of Sri Lanka	27	–	2,952,879	–	2,952,879	2,952,879
Placements with banks	28	–	37,442,912	–	37,442,912	37,442,912
Financial assets at amortised cost – loans and advances to customers	32	–	–	477,425,470	477,425,470	510,924,245
Financial assets at amortised cost – Debt and other instruments	34	116,567,539	–	–	116,567,539	114,795,690
Other financial assets	42	–	–	6,198,600	6,198,600	6,198,600
		116,567,539	63,166,882	483,624,070	663,358,491	695,085,417
Liabilities
Due to banks	44	–	12,372,311	–	12,372,311	12,372,311

31 December		2025
	Note	Level 1 LKR ’000	Level 2 LKR ’000	Level 3 LKR ’000	Fair value LKR ’000	Carrying amount LKR ’000
Financial liabilities at amortised cost – due to depositors	45	–	–	566,423,213	566,423,213	564,758,931
Financial liabilities at amortised cost – due to other borrowers	46	–	–	134,354,757	134,354,757	134,354,757
Debt securities issued	47	–	12,614,066	–	12,614,066	12,286,859
Other financial liabilities	50	–	–	8,298,358	8,298,358	8,298,358
Subordinated term debt	51	–	10,343,084	–	10,343,084	9,363,299
		–	35,329,461	709,076,328	744,405,789	741,434,515

31 December		2024
	Note	Level 1 LKR ’000	Level 2 LKR ’000	Level 3 LKR ’000	Fair value LKR ’000	Carrying amount LKR ’000
Assets
Cash and cash equivalents	26	–	13,504,806	–	13,504,806	13,504,806
Balances with Central Bank of Sri Lanka	27	–	2,328,346	–	2,328,346	2,328,346
Placements with banks	28	–	11,229,492	–	11,229,492	11,229,492
Financial assets at amortised cost – loans and advances to banks	31	1,664,755	–	–	1,664,755	1,500,338
Financial assets at amortised cost – loans and advances to customers	32	–	–	377,802,310	377,802,310	395,047,053
Financial assets at amortised cost – Debt and other instruments	34	105,839,660	–	–	105,839,660	105,641,690

31 December		2024
	Note	Level 1 LKR ’000	Level 2 LKR ’000	Level 3 LKR ’000	Fair value LKR ’000	Carrying amount LKR ’000
Other financial assets	42	–	–	4,946,528	4,946,528	4,946,528
		107,504,415	27,062,644	382,748,838	517,315,897	534,198,253
Liabilities
Due to banks	44	–	7,149,474	–	7,149,474	7,149,474
Financial liabilities at amortised cost – Due to depositors	45	–	–	459,260,928	459,260,928	465,153,180
Financial liabilities at amortised cost – Due to other borrowers	46	–	–	96,755,632	96,755,632	96,755,632
Debt securities issued	47	–	14,852,236	–	14,852,236	14,690,723
Other financial liabilities	50	–	–	7,441,320	7,441,320	7,441,320
Subordinated term debt	51	–	13,480,708	–	13,480,708	18,234,054
		–	35,482,418	563,457,880	598,940,298	609,424,383

B. Group

As at 31 December		2025
	Note	Level 1 LKR ’000	Level 2 LKR ’000	Level 3 LKR ’000	Fair value LKR ’000	Carrying amount LKR ’000
Assets
Cash and cash equivalents	26	–	22,804,954	–	22,804,954	22,804,954
Balances with Central Bank of Sri Lanka	27	–	2,952,879	–	2,952,879	2,952,879
Placements with banks	28	–	37,442,912	–	37,442,912	37,442,912
Financial assets at amortised cost – loans and advances to customers	32	–	–	477,425,470	477,425,470	510,924,245
Financial assets at amortised cost – Debt and other instruments	34	116,576,836	–	–	116,576,836	114,804,987
Other financial assets	42	–	–	6,373,793	6,373,793	6,373,793
Total		116,576,836	63,200,745	483,799,263	663,576,844	695,303,770
Liabilities
Due to banks	44	–	12,372,311	–	12,372,311	12,372,311
Financial liabilities at amortised cost – Due to depositors	45	–	–	565,569,764	565,569,764	563,905,482
Financial liabilities at amortised cost – Due to other borrowers	46	–	–	134,363,917	134,363,917	134,363,917
Debt securities issued	47	–	12,614,066	–	12,614,066	12,286,859
Other financial liabilities	50	–	–	8,609,096	8,609,096	8,609,096
Subordinated term debt	51	–	10,343,084	–	10,343,084	9,363,299
		–	35,329,461	708,542,777	743,872,238	740,900,964

As at 31 December		2024
	Note	Level 1 LKR ’000	Level 2 LKR ’000	Level 3 LKR ’000	Fair value LKR ’000	Carrying amount LKR ’000
Assets
Cash and cash equivalents	26	–	13,523,476	–	13,523,475	13,523,475
Balances with Central Bank of Sri Lanka	27	–	2,328,346	–	2,328,346	2,328,346
Placements with banks	28	–	11,229,492	–	11,229,492	11,229,492
Financial assets at amortised cost – loans and advances to banks	31	1,664,755	–	–	1,664,755	1,500,338
Financial assets at amortised cost – loans and advances to customers	32	–	–	377,802,310	377,802,310	395,047,053
Financial assets at amortised cost – Debt and other instruments	34	105,839,660	–	–	105,839,660	105,701,871
Other financial assets	42	–	–	5,135,115	5,135,115	5,135,115
Total		107,504,415	27,081,314	382,937,425	517,523,153	534,465,690
Liabilities
Due to banks	44		7,149,474		7,149,474	7,149,474
Financial liabilities at amortised cost – Due to depositors	45			458,467,312	458,467,312	464,359,564
Financial liabilities at amortised cost – Due to other borrowers	46			96,755,632	96,755,632	96,755,632
Debt securities issued	47		14,852,236		14,852,236	14,690,723
Other financial liabilities	50			7,719,982	7,719,982	7,719,982
Subordinated term debt	51		13,480,708		13,480,708	18,234,054
		–	35,482,418	562,942,926	598,425,344	608,909,429

Given below is the basis adopted by the Bank/Group in order to establish the fair values of the financial instruments.

9.4.1 Cash and Cash Equivalents and Placements with Banks

Carrying amounts of cash and cash equivalents and placements with banks approximates their fair value as these balances have a remaining maturity of less than three months from the reporting date.

9.4.2 Loans to and Receivables from Other Customers – Lease Rentals Receivable

The estimated fair value of lease rentals receivable is the present value of future cash flows expected to be received from such finance lease facilities calculated based on current interest rates for similar type of facilities.

9.4.3 Loans to and Receivables from Other Customers – Other Loans

	Composition %
Floating rate loan portfolio	62
Fixed rate loans	38
– With remaining maturity less than one year	9
– Others	29

Since the floating rate loans can be repriced monthly, quarterly and semi-annually in tandem with market rates fair value of these loans is approximately same as the carrying value. Carrying amount of fixed rate loans with a remaining maturity of less than one year approximates the fair value.

Based on the results of the fair value computed on the lease rentals receivable, it is estimated that the fair value of the other loans at fixed interest rates with maturity of more than one year is not materially different to its carrying value as at the reporting date.

9.4.4 Financial Assets at Amortised Cost – Debt and Other Instruments

Fair value of the fixed rate debentures are based on prices quoted in the Colombo Stock Exchange, where there is an active market for quoted debentures.

Where there is no active market, fair value of the fixed rate debentures has been determined by discounting the future cash flows by the interest rates derived with reference to Government Treasury Bond rates with adjustments to risk premiums at the time of investment.

9.4.5 Due to Banks

The carrying value of amounts due to banks approximates their fair value as these balances have a remaining maturity of less than one year approximate their fair value.

The others are repriced either monthly, quarterly or semi annually and rates are revised in line with changes in market rates. Hence, the carrying value of these borrowings approximate the fair value.

9.4.6 Due to Other Customers

The carrying value of deposits with a remaining maturity of less than one year approximates the fair value.

Fair values of deposits with a remaining maturity of more than one year is estimated using discounted cash flows applying current interest rates offered for deposits of similar remaining maturities.

The fair value of a deposit repayable on demand is assumed to be the amount payable on demand at the reporting date and the savings account balances are repriced frequently to match with the current market rates, therefore the demand and saving deposits carrying amounts are reasonable approximation to the fair values as at the reporting date.

9.4.7 Due to Other Borrowers

This consists of borrowings sourced from multilateral and bilateral institutions.

Fixed rate borrowings which relates on credit lines are based on interest rates which are specific to each refinancing arrangement and as such there are no comparable market rates. Hence, the fair value approximates the carrying value.

9.4.8 Debt Securities Issued

Debts issued comprise the Sri Lanka Rupee debentures. The Sri Lanka Rupee debentures are fair valued by reference to current Government Treasury Bond rates with a risk premium.

9.4.9 Subordinated term debts

The fair value of fixed rate subordinated debentures has been determined by discounting the future cash flows by the interest rates

prevailing as at the reporting date for similar instruments.

The carrying values of balances with Central Bank of Sri Lanka, other financial assets and other financial liabilities are reasonable approximation of their fair values since, those are short term in nature or re-priced to current market rates frequently.

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Interest income	11.1.1	81,344,512	76,907,481	81,347,355	76,910,407
Fee and commission income	12.1.1	9,561,602	6,334,637	9,561,077	6,333,848
Net gains from trading	13	2,481,139	1,272,879	2,481,139	1,272,879
Net gains from derecognition of financial assets	14	1,687,725	3,868,231	1,687,725	3,868,231
Net other operating income	15	1,621,294	1,176,110	2,204,263	1,770,894
		96,696,272	89,559,338	97,281,559	90,156,259

Accounting Policy

Effective Interest Rate

Interest income and expenses are recognised in profit or loss using the effective interest method.

The “effective interest rate” is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

the gross carrying amount of the financial asset; or
the amortised cost of the financial liability.

When calculating the effective interest rate for financial instruments other than purchased or originated credit-impaired assets, the Group estimates future cash flows considering all contractual terms of the financial instrument, other than ECL. For purchased or originated credit impaired financial assets, a credit adjusted effective interest rate is calculated using estimated future cash flows including ECL.

The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability.

Amortised Cost and Gross Carrying Amount

The “amortised cost” of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any expected credit loss allowance. The “gross carrying amount of a financial asset” is the amortised cost of a financial asset before adjusting for any expected credit loss allowance.

Calculation of Interest Income and Expense

The effective interest rate of a financial asset or financial liability is calculated on initial recognition of a financial asset or a financial liability. In calculating interest income and expenses, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit impaired) or to the amortised cost of the liability. The effective interest rate is revised as a result of periodic re-estimation of cash flows of floating-rate instruments to reflect movements in market rates of interest. The effective interest rate is also revised for fair value hedge adjustments at the date on which amortisation of the hedge adjustment begins.

For the financial asset that has become credit impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

11.1 Composition

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Interest income	11.1.1	81,344,512	76,907,481	81,347,355	76,910,407
Interest expenses	11.1.2	(50,391,790)	(48,786,254)	(50,312,768)	(48,708,495)
Net interest income		30,952,722	28,121,227	31,034,587	28,201,912

11.1.1 Interest Income

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Placements with banks		1,307,000	1,088,841	1,309,843	1,091,767
Financial assets measured at fair value through profit or loss		223,923	89,148	223,923	89,148
Financial assets at amortised cost – Loans and advances to banks		241,242	34,678	241,242	34,678
Financial assets at amortised cost and fair value through other comprehensive income Loans and advances to customers	11.1.1.1	51,268,305	46,677,011	51,268,305	46,677,011
Financial assets at amortised cost – Debt and other instruments		17,189,920	15,252,022	17,189,920	15,252,022
Financial assets measured at fair value through other comprehensive income		10,827,200	13,555,554	10,827,200	13,555,554
Securities purchased under resale agreements		286,922	210,227	286,922	210,227
Total interest income		81,344,512	76,907,481	81,347,355	76,910,407

11.1.1.1 Interest income from loans and advances to customers includes modifications made on restructures offered by the Bank in normal cause of business. These restructures have been designed to address individual customer difficulties and improve their ability to meet financial obligations. There is no material modification loss or gain due to changes in the original terms and conditions of the loan during the year ended 31 December 2025.

11.1.2 Interest Expenses

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Due to banks		561,636	563,827	561,636	563,827
Financial liabilities at amortised cost – Due to depositors		38,420,030	38,553,285	38,342,829	38,473,005

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Financial liabilities at amortised cost – Due to other borrowers		2,346,499	2,532,083	2,346,499	2,532,083
Debt securities issued		3,188,929	3,764,650	3,188,929	3,764,650
Interest expense on lease liabilities	52.5	129,648	144,282	127,827	146,803
Securities sold under repurchase agreements		5,745,048	3,228,127	5,745,048	3,228,127
Total interest expenses		50,391,790	48,786,254	50,312,768	48,708,495

The amounts reported above include interest income and expense, calculated using the effective interest method.

11.1.3 net Interest Income from Government Securities – Bank/Group

For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
Interest Income
Securities purchased under resale agreements	528,163	244,905
Financial assets measured at fair value through profit or loss	223,923	89,148
Financial assets at amortised cost – Debt and other instruments	17,169,470	15,231,472
Financial assets measured at fair value through other comprehensive income	10,733,850	13,502,709
	28,655,407	29,068,234
Interest Expenses
Securities sold under repurchase agreements	5,745,048	3,228,127
Net Interest income	22,910,359	25,840,107

Accounting Policy

Fee and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate.

Other fees and commission income are recognised as the related services are performed. When a loan commitment is not expected to result in the draw down of a loan, the related loan commitment fees are recognised on a straight-line basis over the commitment period.

A contract with a customer that results in a recognised financial instrument in the Group’s financial statements may be partially in the scope of SLFRS 9 and partially in the scope of SLFRS 15. If this is the case, then the Group first applies SLFRS 9 to separate and measure the part of the contract that is in the scope of SLFRS 9 and then applies SLFRS 15 to the residual.

Fees for guarantees and trade related commissions are recognised on a straight-line basis over the period of the contract. Other fees and commission expense relate mainly to transaction and service fees, which are expensed, as the services are received.

12.1 Composition

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Fee and commission income	12.1.1	9,561,602	6,334,637	9,561,077	6,333,848
Fee and commission expenses		(2,248,505)	(1,405,415)	(2,248,505)	(1,405,415)
Net fee and commission income		7,313,097	4,929,222	7,312,572	4,928,433

12.1.1 Fee and Commission Income

In the following table, fee and commission income from contracts with customers in the scope of SLFRS 15 is disaggregated by major type of services.

Major service lines

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Loans and advances	1,770,424	1,062,275	1,770,424	1,062,275
Credit cards	3,549,944	2,320,546	3,549,944	2,320,546
Trade and remittances	2,282,088	1,717,390	2,282,088	1,717,390
Customer accounts	920,507	535,827	920,507	535,827
Guarantees	495,190	407,069	495,190	407,069
Others financial services	543,449	291,530	542,924	290,741
Fee and commission income	9,561,602	6,334,637	9,561,077	6,333,848

12.1.2 Performance Obligations and Revenue Recognition Policies

Fee and commission income from contracts with customers is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a service to a customer.

The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies.

Type of service	Nature and timing of satisfaction of performance obligations, including significant payment terms	Revenue recognition under SLFRS 15
Retail and corporate banking service	The Group provides banking services to retail and corporate customers, including account management, provision of overdraft facilities, foreign currency transactions, credit card and servicing fees.	Revenue from account service and servicing fees is recognised over time as the services are provided.
	Fees for ongoing account management are charged to the customer’s account on a monthly basis. The Group sets the rates separately for retail and corporate banking customers in each jurisdiction on an annual basis.	Revenue related to transactions is recognised at the point in time when the transaction takes place.
	Transaction-based fees for interchange, foreign currency transactions and overdrafts are charged to the customer’s account when the transaction takes place.
	Servicing fees are charged on a monthly basis and are based on fixed rates reviewed annually by the Group.

Accounting Policy

“Results arising from trading activities include all gains and losses from realised and unrealised fair value changes, related capital gains and losses, dividend income from trading assets and trading liabilities and foreign exchange differences.

The Bank has non-trading derivatives held for risk management purposes (e.g., forward foreign exchange purchase or sale contracts) that do not form part of qualifying hedge relationship, that are mandatorily fair valued through profit or loss. In respect of such financial instruments, all realised and unrealised fair value changes and foreign exchange differences are included.

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Derivative Financial Instruments
Forward exchange fair value changes from banks and other customers	1,459,710	(926,979)	1,459,710	(926,979)
Gains on financial assets fair value through profit or loss equity securities – unit trust	191,082	176,492	191,082	176,492
Foreign exchange from Banks and Other Customers	(1,040,069)	788,884	(1,040,069)	788,884
Financial assets recognised through profit or loss – measured at fair value
Government securities

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Net marked to market (losses)/gains	(32,747)	27,007	(32,747)	27,007
Net capital gains	163,623	22,080	163,623	22,080
Equities
Net marked to market (losses)/gains	(153,711)	1,159,568	(153,711)	1,159,568
Net capital gains/(losses)	1,736,073	(49,879)	1,736,073	(49,879)
Dividend income	157,178	75,706	157,178	75,706
	2,481,139	1,272,879	2,481,139	1,272,879

Accounting Policy

Net gains from derecognition of financial assets comprise realised gains less losses related to debt instruments measured at FVTPL, FVOCI and financial assets measured at amortised cost as per SLFRS 9.

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Fair value through profit or loss-gains on sale of equity securities		–	910	–	910
Amortised cost-gains on sale of government securities	14.1	–	990,917	–	990,917
Fair value through other comprehensive income-gains on sale of government securities		1,687,725	2,876,404	1,687,725	2,876,404
		1,687,725	3,868,231	1,687,725	3,868,231

14.1 NET GAINS FROM DERECOGNITION OF Sri lanka international soveriegn bonds (slisb)

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Sales proceed from the disposal of SLISB		–	5,043,047	–	5,043,047
Amortised cost of the SLISB	14.1.1	–	(4,052,130)	–	(4,052,130)
Amortised cost-gains on sale of government securities		–	990,917	–	990,917

14.1.1 AMORTIsED COST OF SLISB

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Matured SLISB – book value		–	8,650,173	–	8,650,173
Matured SLISB – impairment	42.1.1	–	(4,751,616)	–	(4,751,616)
Unmatured SLISB – book value	34.1	–	341,273	–	341,273
Unmatured SLISB – impairment	34.4	–	(187,700)	–	(187,700)
Amortised cost-gain on sale of SLISB		–	4,052,130	–	4,052,130

Accounting Policy

Net other operating income includes realised gain or loss on sale of fair value through other comprehensive income securities (e.g., Treasury Bills and Bonds, and dividend income from ordinary shares classified as fair value through other comprehensive income financial assets, dividend income from group entities, rental income, gains on disposal of property, plant and equipment and foreign exchange gains and losses).

Rental Income

Rental income and expenses are accounted on a straight-line basis over the entire period of the tenancy incorporating predetermined rent escalation during the period of the tenancy.

Dividend Income

Dividend income received by way of cash or scrip is recognised when the right to receive dividend is established. Dividend income from subsidiaries and joint venture is recognised when the Bank’s right to receive the dividend is established.

Gains and Losses on Disposal of Assets

Net gains and losses of a revenue nature arising from the disposal of property, plant and equipment and other non-current assets including investments in subsidiaries, joint ventures and associates are accounted for, in the statement of profit or loss after deducting from the proceeds on disposal, the carrying amount of such assets and the related selling expenses.

Foreign Exchange Gain/(Loss)

Foreign currency positions are revalued at each reporting date. Gains and losses arising from changes in fair value are included in the income statement in the period in which they arise.

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Financial assets measured at fair value through other comprehensive income
Dividend income	1,309,324	967,392	1,309,324	967,392
Dividend income from subsidiaries and associate	158,427	86,798	–	–
Premises rental income	–	–	512,444	472,154
Net gains on sale of property, plant and equipment	13,155	19,874	13,155	19,874
Foreign exchange gains/(losses)	15,878	13,723	25,125	(788)
Recovery of loans written-off	77,773	45,317	77,773	45,317
Others	46,737	43,006	266,442	266,945
	1,621,294	1,176,110	2,204,263	1,770,894

Accounting Policy

The Group recognises loss allowances for ECL on the following financial instruments that are not measured at FVTPL:

financial assets that are debt instruments;
lease receivables;
financial guarantee contracts issued; and
loan commitments issued.

No impairment loss is recognised on equity investments.

The Group measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are measured as 12-month ECL:

debt investment securities that are determined to have low credit risk at the reporting date; and
other financial instruments on which credit risk has not increased significantly since their initial recognition.

The Group considers a debt investment security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of “investment grade” other than the investment in government debt instruments. The Group does not apply the low credit risk exemption to any other financial instruments.

Individually Assessed Loans and Advances and Amortised Cost Debt Instruments

These are exposures, where evidence of impairment exists and those that are individually significant meriting individual assessment for objective evidence of impairment and computation of impairment allowance. The factors considered in determining that the exposures are individually significant include the size of the loan.

For all loans and amortised cost debt instruments that are considered individually significant, Bank assesses on a case by case basis, whether there is any objective evidence of impairment. The criteria used by the Bank to determine that there is such objective evident include –

Significant financial difficulty of the borrower or issuer;
A breach of contract such as a default or past due event;
The restructuring of a loan or advance by the Bank on terms that the Bank would not consider otherwise;
It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
The disappearance of an active market for a security because of financial difficulties.

A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment.

Impairment allowance on loans and advances and other financial instruments measured at amortised cost are calculated as the difference between the carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate.

Collective Assessment

This includes all loans and advances of smaller value where there is no evidence of impairment and those individually assessed for which no evidence of impairment has been specifically identified on an individual basis.

These loans and advances are grouped together as per Basel Guidelines and product level according to their credit risk characteristics for the purpose of calculating an estimated collective impairment.

In making an assessment of whether an investment in debt instrument is credit-impaired, the Bank considers the following factors:

The market’s assessment of creditworthiness as reflected in the bond yields.
The rating agencies’ assessments of creditworthiness.
The country’s ability to access the capital markets for new debt issuance.
The probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness.
The international support mechanisms in place to provide the necessary support as “lender of last resort” to that country, as well as the intention, reflected in public statements, of Governments and agencies to use those mechanisms. This includes an assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulfil the required criteria.

The Bank manages credit quality using a three stage approach which is in line with SLFRS 9.

12-month ECL are the portion of lifetime ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. Financial instruments for which 12-month ECL are recognised are referred to as “Stage 1 financial instruments”. Financial instruments allocated to Stage 1 have not undergone a significant increase in credit risk since initial recognition and are not credit-impaired.

Lifetime ECL are the ECL that result from all possible default events over the expected life of the financial instrument or the maximum contractual period of exposure. Financial instruments for which lifetime ECL are recognised but that are not credit-impaired are referred to as “Stage 2 financial instruments”. Financial instruments allocated to Stage 2 are those that have experienced a significant increase in credit risk since initial recognition but are not credit-impaired.

Financial instruments for which lifetime ECL are recognised and that are credit-impaired are referred to as “Stage 3 financial instruments”.

Significant Increase in Credit Risk

When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Bank considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Bank’s historical experience and expert credit assessment and including forward-looking information.

The objective of the assessment is to identify whether a significant increase in credit risk has occurred for an exposure by comparing:

– the remaining lifetime probability of default (PD) as at the reporting date; with

– the remaining lifetime PD for this point in time that was estimated at the time of initial recognition of the exposure (adjusted where appropriate for changes in prepayment expectations).

The Bank considers an exposure to have significant increase in credit risk (SICR) when the contractual payment of a customer are more than 30 days past due in accordance with rebuttable presumption in SLFRS 9, or other qualitative indicators reveal that there had been SICR.

Impact of Post-Economic Recovery on Credit Risk Assessment

While Sri Lanka is steadily recovering from the economic crisis, certain industries and customer segments continue to face challenges, resulting in elevated credit risk despite ongoing loan servicing. The bank has assessed the current financial position of customers, their future earning potential, and the sectors they operate in to identify any significant increase in credit risk (SICR). Risk categorisation has been performed to highlight sectors that remain more susceptible to ongoing economic pressures, even as the country recovers. Based on this evaluation, SICR has been determined, and stress testing has been carried out on facilities, with necessary overlays made to account for potential risks. As the economic recovery progresses, the bank remains vigilant in monitoring sectors with heightened risks and adapting its credit risk models accordingly.

Generating the Term Structure of PD

The Bank collects performance and default information about its credit risk exposures analysed by type of product and borrower.

The Bank employs statistical models to analyse the data collected and generate estimates of the remaining lifetime PD of exposures and how these are expected to change as a result of the passage of time.

Determining Whether Credit Risk has Increased Significantly

The Bank assesses whether credit risk has increased significantly since initial recognition at each reporting date.

Credit risk may also be deemed to have increased significantly since initial recognition based on qualitative factors linked to the Bank’s credit risk management processes that may not otherwise be fully reflected in its quantitative analysis on a timely basis. This will be the case for exposures that meet certain heightened risk criteria, such as placement on a watch list. Such qualitative factors are based on its expert judgement and relevant historical experiences.

As a backstop, the Bank considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due. Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment has not been received.

If there is evidence that there is no longer a significant

increase in credit risk relative to initial recognition, then the loss allowance on an instrument returns to being measured at 12-month ECL.

The Bank monitors the effectiveness of the criteria used to identify significant increases in credit risk by regular reviews to confirm that:

– the criteria are capable of identifying significant increases in credit risk before an exposure is in default;

– the criteria do not align with the point in time when an asset becomes 30 days past due; except for, for which a backstop of 60 days past due is applied.

– the average time between the identification of a significant increase in credit risk and default appears reasonable;

– exposures are not generally transferred directly from 12-month ECL measurement to credit impaired; and

– there is no unwarranted volatility in loss allowance from transfers between 12-month PD (Stage 1) and lifetime PD (Stage 2).

– All credit facilities listed in section 07 of Directive No. 13 of 2021 issued by Central Bank of Sri Lanka on adoption of Sri Lanka Accounting Standards SLFRS 9- “Financial Instruments”.

Definition of Default

The Bank considers a financial asset to be in default when:

– the borrower is unlikely to pay its credit obligations to the Bank in full, without recourse by the Bank to actions such as realising security (if any is held); or

– the borrower is more than 90 days past due on any material credit obligation to the Bank.

– the assessment of the external rating agencies indicates a default grading of the borrower; or

– all credit facilities listed in section 07 of Directive No. 13 of 2021 issued by Central Bank of Sri Lanka on adoption of Sri Lanka Accounting Standard SLFRS 09 – “Financial Instruments”.

Financial Instruments

In assessing whether a borrower is in default, the Bank considers indicators that are:

– qualitative – e.g. breaches of covenant;

– quantitative – e.g. overdue status and non-payment on another obligation of the same issuer to the Bank; and based on data developed internally and obtained from external sources

Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances. The definition of default largely aligns with that applied by the Bank for regulatory capital purposes.

Incorporation of forward-looking Information

The Bank incorporates forward-looking information into both its assessment of whether the credit risk of an instrument has increased significantly since its initial recognition and its measurement of ECL using a variety of external actual and forecasted information.

The Bank formulates a base case view of the future direction of relevant economic variables as well as a representative range (Best Case and Worst Case) of other possible forecast scenarios.

This process involves developing two or more additional economic scenarios and considering the relative probabilities of each outcome. External information includes economic data and forecasts published by both local and international sources. The base case represents a most-likely outcome. The other scenarios represent more optimistic and more pessimistic outcomes.

The Bank has identified and documented key drivers of credit risk and credit losses for each portfolio of financial instruments and, using an analysis of historical data, has estimated relationships between macroeconomic variables credit risk and credit losses.

The economic variables used by the Bank based on the statistical significance include the followings:

Unemployment rate		Base case scenario along with two other scenarios has been used (Best Case and Worst Case)
GDP growth rate
Inflation rate
Exchange rate

Modified Financial Assets

The contractual terms of a loan may be modified for a number of reasons, including changing market conditions, customer retention and other factors not related to a current or potential credit deterioration of the customer. An existing loan whose terms have been modified may be derecognised and the renegotiated loan recognised as a new loan at fair value in accordance with the accounting policy set out in Note 5.3.5.

When the terms of a financial asset are modified and the modification does not result in derecognition, the determination of whether the asset’s credit risk has increased significantly reflects comparison of:

– its remaining lifetime PD at the reporting date based on the modified terms; with

– the remaining lifetime PD estimated based on data on initial recognition and the original contractual terms.

When modification results in derecognition, a new loan is recognised and allocated to Stage 1 (assuming it is not credit-impaired at that time).

The Bank renegotiates loans to customers in financial difficulties (referred to as “forbearance activities”) to maximise collection opportunities and minimise the risk of default. Loan forbearance is granted on a selective basis if the debtor is currently in default on its debt or if there is a high risk of default, there is evidence that the debtor made all reasonable efforts to pay under the original contractual terms and the debtor is expected to be able to meet the revised terms.

The revised terms usually include extending the maturity, changing the timing of interest payments and amending the terms of loan covenants. The Bank’s Credit Committee regularly reviews reports on forbearance activities.

For financial assets modified as part of the Bank’s forbearance activity, the estimate of PD reflects whether the modification has improved or restored the Bank’s ability to collect interest and principal and the Bank’s previous experience of similar forbearance action. As part of this process, the Bank evaluates the borrower’s payment performance against the modified contractual terms and considers various behavioural indicators.

Generally, forbearance is a qualitative indicator of a significant increase in credit risk and an expectation of forbearance may constitute evidence that an exposure is credit-impaired. A customer needs to demonstrate consistently good payment behaviour over a period of time before the exposure is no longer considered to be credit-impaired/to have SICR or the PD is considered to

have decreased such that it falls within the 12-month PD ranges for the asset to be considered Stage 1.

If the terms of a financial asset are modified, then the Group evaluates whether the cash flows of the modified asset are substantially different.

If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value plus any eligible transaction costs. If cash flows are modified when the borrower is in financial difficulties, then the objective of the modification is usually to maximise recovery of the original contractual terms rather than to originate a new asset with substantially different terms. This approach impacts the result of the quantitative evaluation and means that the derecognition criteria are not usually met in such cases. If the modification of a financial asset measured at amortised cost or FVOCI does not result in derecognition of the financial asset, then the Bank first recalculates the gross carrying amount of the financial asset using the original effective interest rate of the asset and recognises the resulting adjustment as a modification gain or loss in profit or loss.

Measurement of ECL

ECL are a probability-weighted estimate of credit losses. They are measured as follows:

– financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive);

– financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows;

– undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Group if the commitment is drawn down and the cash flows that the Group expects to receive; and

– financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Group expects to recover.

When discounting future cash flows, the following discount rates are used:

– financial assets other than purchased or originated credit-impaired (POCI) financial assets and lease receivables: the original effective interest rate or an approximation thereof;

– POCI assets: a credit-adjusted effective interest rate;

– lease receivables: the discount rate used in measuring the lease receivable;

– undrawn loan commitments: the effective interest rate, or an approximation thereof, that will be applied to the financial asset resulting from the loan commitment; and

– financial guarantee contracts issued: the rate that reflects the current market assessment of the time value of money and the risks that are specific to the cash flows.

The key inputs into the measurement of ECL are the term structure of the following variables:

– Probability of default (PD);

– Loss given default (LGD);

– Exposure at default (EAD).

ECL for exposures in Stage 1 are calculated by multiplying the 12-month PD by LGD and EAD.

Lifetime ECL are calculated by multiplying the lifetime PD by LGD and EAD.

The methodology for estimating PDs is discussed above under the heading “Generating the term structure of PD”.

LGD is the magnitude of the likely loss if there is a default. The Bank estimates LGD parameters based on the history of recovery rates of claims against defaulted counterparties. The LGD models consider the structure, collateral, seniority of the claim, counterparty industry and recovery, costs of any collateral that is integral to the financial asset. LGD estimates are recalibrated for different economic scenarios and, for lending collateralised by property, to reflect possible changes in property prices. They are calculated on a discounted cash flow basis using the effective interest rate as the discounting factor.

EAD represents the expected exposure in the event of a default. The Bank derives the EAD from the current exposure to the counterparty and potential changes to the current amount allowed under the contract and arising from amortisation. The EAD of a financial asset is its gross carrying amount at the time of default. For lending commitments, the EADs are potential future amounts that may be drawn under the contract, which are estimated based on historical observations and forward-looking forecasts. For financial guarantees, the EAD represents the amount of the guaranteed exposure when the financial guarantee becomes payable. For some financial assets, EAD is determined by modelling the range of possible exposure outcomes at various points in time using scenario and statistical techniques.

As described above, and subject to using a maximum of a 12-month PD for Stage 1 financial assets, the Bank measures ECL considering the risk of default over the maximum contractual period (including any borrower’s extension options) over which it is exposed to credit risk, even if, for credit risk management purposes, the Bank considers a longer period. The maximum contractual period extends to the date at which the Bank has the right to require repayment of an advance or terminate a loan commitment or guarantee.

Where modelling of a parameter is carried out on a collective basis, the financial instruments are Grouped on the basis of shared risk characteristics, which may include:

– instrument type;

– credit risk grade;

– collateral type;

– date of initial recognition;

– remaining term to maturity;

– industry; and

– client segment.

The Groupings are subject to regular review to ensure that exposures within a particular Group remain appropriately homogeneous.

Restructured Financial Assets

If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognised and ECL are measured as follows.

– If the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset.

– If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset.

Purchase of Credit-Impaired (Poci) Financial Assets

POCI financial assets are assets that are credit-impaired on initial recognition. For POCI assets, lifetime ECL are incorporated into the calculation of the effective interest rate on initial recognition.

Consequently, POCI assets do not carry an impairment allowance on initial recognition. The amount recognised as a loss allowance subsequent to initial recognition is equal to the changes in lifetime ECL since initial recognition of the asset.

Write-off

Loans and debt securities are written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment is carried out at the individual asset level.

Reversals of Impairment

If the amount of an impairment loss decreases in a subsequent period, and the decrease can be related objectively to an event occurring after the impairment was recognised, the excess is written-back by reducing the loan impairment allowance accordingly. The write-back is recognised in the income statement.

Renegotiated Loans

Loans subject to collective impairment assessment whose terms have been renegotiated are no longer considered past due, but are treated as up-to-date loans for measurement purposes once a minimum number of payments required have been received.

Loans subject to individual impairment assessment, whose terms have been renegotiated, are subject to ongoing review to determine whether they remain impaired. The carrying amounts of loans that have been classified as renegotiated retain this classification until it is upgraded.

Financial Guarantee Contracts Held

The Group assesses whether a financial guarantee contract held is an integral element of a financial asset that is accounted for as a component of that instrument or is a contract that is accounted for separately. The factors that the Group considers when making

this assessment.

– the guarantee is implicitly part of the contractual terms of the debt instrument;

– the guarantee is required by laws and regulations that govern the contract of the debt instrument;

– the guarantee is entered into at the same time as and in contemplation of the debt instrument; and

– the guarantee is given by the parent of the borrower or another company within the borrower’s group.

If the Group determines that the guarantee is an integral element of the financial asset, then any premium payable in connection with the initial recognition of the financial asset is treated as a transaction cost of acquiring it. The Group considers the effect of the protection when measuring the fair value of the debt instrument and when measuring ECL.

If the Group determines that the guarantee is not an integral element of the debt instrument, then it recognises an asset representing any prepayment of guarantee premium and a right to compensation for credit losses. A prepaid premium asset is recognised only if the guaranteed exposure neither is credit-impaired nor has undergone a significant increase in credit risk when the guarantee is acquired. These assets are recognised in ‘other assets’. The Group presents gains or losses on a compensation right in profit or loss in the line item “impairment losses on financial instruments”.

Presentation of allowance for ECL in the statement of financial position loss allowances for ECL are presented in the statement of financial position as follows:

– financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets;

– loan commitments and financial guarantee contracts: generally, as a provision;

– debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognised in fair value reserve.

16.1 Composition

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Financial assets at amortised cost – loans and advances to customers	4,791,433	3,278,247	4,791,433	3,278,247
Financial assets at amortised cost – Debt and other instruments	496	–	496	–
Financial assets measured at fair value through other comprehensive income	112,937	–	112,937	–
Loan commitments and financial guarantee contracts	(207,545)	801,630	(207,545)	801,630
Other assets – Matured SLISB*	–	518,264	–	518,264
Other debts and Investments	228,962	50,219	228,962	50,219
Reversal of provision made on investment in subsidiaries	–	–	–	–
	4,926,283	4,648,360	4,926,283	4,648,360

*SLISB – Sri Lanka International Sovereign Bond

16.2 Impairment Charge

For the year ended 31 December		2025
	Note	Stage 01 LKR ’000	Stage 2 LKR ’000	Stage 3 LKR ’000	Total LKR ’000
Financial assets at amortised cost – Loans and advances to customers	32.1.4	423,178	(2,358,425)	6,726,680	4,791,433
Financial assets at amortised cost – Debt and other instruments	34.4	496	–	–	496
Financial assets measured at fair value through other comprehensive income – PDI/US Treasury Bonds	35.1	233	86,257		86,490
Financial assets measured at fair value through other comprehensive income – Loans and advances to customers	33.1.4	26,447			26,447
Loan commitments and financial guarantee contracts	58.1.1	15,536	(23,595)	(199,487)	(207,545)
		465,890	(2,295,763)	6,527,193	4,697,321
Other debts					228,962
Total impairment charge – Bank/Group					4,926,283

For the year ended 31 December		2024
	Note	Stage 01 LKR ’000	Stage 02 LKR ’000	Stage 03 LKR ’000	Total LKR ’000
Financial assets at amortised cost – Loans and advances to customers	32.1.4	(87,880)	(1,305,241)	4,671,368	3,278,247
Financial assets at amortised cost – Debt and other instruments
Other assets – Matured SLISB	42.1.2		518,264		518,264
Loan commitments and financial guarantee contracts	58.1.1	88,291	27,766	685,573	801,630

For the year ended 31 December		2024
	Note	Stage 01 LKR ’000	Stage 02 LKR ’000	Stage 03 LKR ’000	Total LKR ’000
		411	(759,211)	5,356,941	4,598,141
Other debts					50,219
Total impairment charge – Bank/Group					4,648,360

16.3 Judgemental Adjustment

Where appropriate, the Bank makes adjustments to the ECL estimate outside the Bank’s regular modelling process to reflect management judgement.

For the year ended 31 December	2025				2024
	Stage 01	Stage 02	Stage 03	Total	Stage 01	Stage 02	Stage 03	Total
Loss allowance before judgemental adjustment	677,573	(1,320,894)	7,050,697	6,407,376	(316,564)	63,180	2,736,466	2,483,082
Management judgemental adjustment (Note 16.3.1)	(254,395)	(1,037,531)	(324,017)	(1,615,943)	228,684	(1,368,421)	1,934,902	795,165
Impairment charge/(reversal)	423,178	(2,358,425)	6,726,680	4,791,433	(87,880)	(1,305,241)	4,671,368	3,278,247

16.3.1 JUDGEMENTAL ADJUSTMENT MOVEMENT

As at 31 December	2025				2024
	Judgemental adjustment on the Stage 1 exposure	Judgemental adjustment on the Stage 2 exposure	Judgemental adjustment on the Stage 3 exposure	Total	Judgemental adjustment on the Stage 1 exposure	Judgemental adjustment on the Stage 2 exposure	Judgemental adjustment on the Stage 3 exposure	Total
Balance at 1 January	1,088,504	1,284,579	1,934,902	4,307,985	859,820	2,653,000	–	3,512,820
During the year (reversal)/charge	(254,395)	(1,037,531)	(324,017)	(1,615,943)	228,684	(1,368,421)	1,934,902	795,165
Balance at 31 December	834,109	247,048	1,610,885	2,692,042	1,088,504	1,284,579	1,934,902	4,307,985

Accounting policy in Note 48.

Short-term Employee Benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

17.1 Composition

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Salaries and other benefits		6,857,623	7,370,064	7,005,133	7,580,673
Contributions to defined benefit plans	17.1.1	349,189	325,198	356,858	335,569
Contributions to defined contribution plans	17.1.2	742,287	632,963	762,472	664,398

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
		7,949,099	8,328,225	8,124,463	8,580,640

17.1.1 Contributions to Defined Benefit Plans

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Funded pension liability
Current service cost	45,594	44,561	45,594	44,561
Interest on obligation	301,621	307,133	301,621	307,133
Expected return on pension assets	(334,134)	(374,984)	(334,134)	(374,984)
	13,081	(23,290)	13,081	(23,290)
Unfunded pension liability
Interest on obligation	5,393	5,684	5,393	5,684
	5,393	5,684	5,393	5,684
Unfunded end of service gratuity liability
Current service cost	195,564	191,245	199,892	198,903
Interest on obligation	135,151	151,560	138,492	154,273
	330,715	342,805	338,384	353,175
Total contribution to defined benefit plans	349,189	325,198	356,858	335,569

17.1.2 Contributions to Defined Contribution Plans

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Employer’s contribution to Employees’ Provident Fund	618,598	527,516	634,981	550,331
Employer’s contribution to Employees’ Trust Fund	123,689	105,447	127,491	114,067
Total defined contribution plans	742,287	632,963	762,472	664,398

Accounting policy in Note 38 to 40.

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Depreciation
– Investment properties	38	–	–	13,312	35,274
– Property, plant and equipment	39	634,850	485,543	660,376	513,089
– Right-of-use assets	39	320,636	346,225	324,860	350,906

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Amortisation
– Intangible assets	40.1	517,166	384,525	524,156	390,929
		1,472,652	1,216,293	1,522,704	1,290,198

Accounting Policy

Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to the income statement.

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Directors’ emoluments	35,075	40,225	39,358	44,591
Auditors’ remuneration
Audit fees and expenses	12,199	11,417	15,704	13,886
Audit related fees and expenses	5,819	3,053	6,516	3,274
Fees for non-audit services	2,645	3,875	2,645	3,875
Professional and legal expenses	5,775	632	8,160	632
Crop Insurance Levy	110,798	83,367	110,798	83,367
Deposit insurance premium	513,432	540,072	513,432	540,072
Advertising and promotion expenses	1,171,338	669,358	1,171,338	657,697
Office administration expenses	879,907	674,483	861,960	693,721
Establishment expenses	1,572,048	1,362,601	1,597,163	1,376,711
Other overhead expenses	5,076,807	3,871,463	5,129,139	3,871,464
	9,385,843	7,260,546	9,456,213	7,289,290

Directors emolument include fees paid to Non-Executive Directors. Remuneration paid to Executive Directors are included under salaries and other benefits in Note 17.1.

Value Added Tax on Financial Services (VAT FS)

VAT on financial services is calculated in accordance with Value Added Tax Act, No. 14 of 2002 and subsequent amendments thereto.

Social Security Contribution Levy on Financial Services (SSCL FS)

SSCL on financial services is calculated in accordance with Social Security Contribution Levy Act No. 25 of 2022. SSCL is chargeable on the same base used for calculation of VAT on financial services.

20.1 Composition

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Value added tax on financial services	4,162,327	3,877,309	4,162,327	3,877,309
Social security contribution levy	578,101	538,515	578,101	538,515
Total	4,740,428	4,415,824	4,740,428	4,415,824

Accounting Policy

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under LKAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Current Taxation

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

The current tax expense for the Year of Assessment 2025/26 has been computed based on the prevailing tax rate of 30%.

As per Part I : Sec. (I) of the Gazette notification issued on 25 October 2022 under Inland revenue Act No. 24 of 2017, Sub section (2) and (3) of Section 66 , the impairment charges of Stage 3 credit facilities classified as per the Sri Lanka Accounting Standards (SLFRS 9) have been considered as allowable deduction (after adjusting for specifications given under Sec 1 of Schedule 1 of the said Gazette notification).

Current tax assets and liabilities are offset only if certain criteria are met.

Deferred Taxation

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.

The Group applied deferred tax related to assets and liabilities arising from a single transaction (Amendments to LKAS 12) from 1 January 2023. Following the amendments, the Group has recognised a separate deferred tax assets in relation to its lease liabilities and a deferred tax liabilities in relation to its right-of-use assets. For further discussion about the impact of adopting the amendments, see Note 41.3.

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax assets/liabilities have been computed at the revised income tax rate of 30%.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if certain criteria are met.

21.1 Amount recognised in income statement

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Current tax expense
Current year		5,484,441	4,677,547	5,659,894	4,814,168
Change in estimates related to prior years		(392,008)	–	(389,597)	–
		5,092,433	4,677,547	5,270,297	4,814,168
Deferred tax expense
Origination/(Reversal) of deferred tax liabilities	41.1	63,244	(121,810)	80,609	(127,055)
(Reversal)/Origination of deferred tax assets	41.2	(634,326)	590,153	(628,153)	577,985
		(571,082)	468,343	(547,544)	450,930
Tax expense on continuing operations		4,521,351	5,145,890	4,722,753	5,265,098

The Group has considered the relevant provisions of the Inland Revenue Act, No. 24 of 2017 and amendments thereto when computing the current and deferred tax assets/liabilities.

21.2 Amount Recognised in Other Comprehensive Income

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Items that are or may be reclassified subsequently to income statement
Movement in fair value reserve (FVOCI debt instruments)	242,093	(272,208)	242,093	(272,208)
Cash flow hedges	158,960	295,473	158,960	295,473
	401,053	23,265	401,053	23,265

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Items that will not be reclassified to income statement
Gain on remeasurement of defined benefit liability – gratuity	(141,855)	(66,714)	(140,211)	(64,934)
Losses on remeasurement of defined benefit liability – pension fund	26,473	7,310	26,473	7,310
Equity investments at FVOCI – net change in fair value	(18,561)	(9,663)	(18,561)	(9,663)
	(133,943)	(69,067)	(132,299)	(67,287)
Total deferred tax charge/(reversal) recognised in OCI	267,110	(45,802)	268,754	(44,022)

21.3 Amounts recognised in Other Comprehensive Income – Analysis of tax expenses

	BANK						GROUP
	2025			2024			2025			2024
	Before tax LKR ’000	Tax (expense) benefit LKR ’000	Net of tax LKR ’000	Before tax LKR ’000	Tax (expense) benefit LKR ’000	Net of tax LKR ’000	Before tax LKR ’000	Tax (expense) benefit LKR ’000	Net of tax LKR ’000	Before tax LKR ’000	Tax (expense) benefit LKR ’000	Net of tax LKR ’000
Items that are or may be reclassified subsequently to Income statement
Movement in fair value reserve (FVOCI debt instruments)	(739,516)	242,093	(497,423)	911,658	(272,208)	639,450	(739,516)	242,093	(497,423)	911,658	(272,208)	639,449
Movement in hedging reserve	(426,314)	158,960	(267,354)	(984,910)	295,473	(689,437)	(529,866)	158,960	(370,906)	(984,910)	295,473	(689,437)
Total	–	401,053	–	–	23,265	–	–	401,053	–	–	23,265	–
Items that will not be reclassified to income statement
Gain/(losses) on remeasurement of defined benefit (assets)/liabilities	384,607	(115,382)	269,225	198,014	(59,404)	138,610	379,126	(113,738)	265,388	192,301	(57,624)	134,677
Equity investment at FVOCI – net change in fair value	61,870	(18,561)	43,309	32,208	(9,663)	22,545	61,870	(18,561)	43,309	32,208	(9,663)	22,545
Total	–	(133,943)	–	–	(69,067)	–	–	(132,299)	–	–	(67,287)	–

* Deferred tax is calculated only fair value gains on treasury bills and bonds.

** Deferred tax is calculated only fair value gains on unquoted shares as the disposal gains on quoted shares is exempted from income taxes.

21.4 Reconciliation of Effective Tax Rate with Income Tax Rate

	BANK				GROUP
For the year ended 31 December	2025		2024		2025		2024
For the year ended 31 December	%	LKR ’000	%	LKR ’000	%	LKR ’000	%	LKR ’000
Tax using 30% tax rate on profit before tax (PBT)	30.00	4,674,502	30.00	4,049,526	30.00	4,785,989	30.00	4,559,250
Non-deductible expenses	21.25	3,311,645	17.61	2,377,184	21.05	3,358,338	13.20	2,006,811
Allowable deductions	(7.91)	(1,232,677)	(4.46)	(602,044)	(7.90)	(1,259,959)	(4.07)	(618,622)
Dividend income	(3.13)	(487,478)	(2.18)	(293,848)	(2.76)	(440,880)	(1.83)	(278,530)
Tax incentives	(3.70)	(576,162)	(6.06)	(817,531)	(3.60)	(574,723)	(5.39)	(819,316)
Taxable timing difference from capital allowances on assets	(0.32)	(49,534)	(0.26)	(35,740)	(0.39)	(62,399)	(0.24)	(35,740)
Tax losses	–	–	–	–	0.05	7,732	–	315
Taxed at different rates	(1.00)	(155,855)	–	–	(0.97)	(154,204)	–	–
Current tax expense	35.19	5,484,441	34.65	4,677,547	35.48	5,659,894	31.68	4,814,168

Accounting Policy

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

represents a separate major line of business or geographic area of operations;
is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or
is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale.

When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re-presented as if the operation had been discontinued from the start of the comparative year.

With the decision to divest its investment in the joint venture Acuity Partners (Pvt) Ltd (subsequently renamed as HNB Investment Bank (Pvt) Ltd), the Bank classified this investment as Assets Held for Sale in the financial statements as at 31 December 2024, in accordance with SLFRS 5, Non-Current Assets Held for Sale and Discontinued Operations. The Bank subsequently completed the divestment on 21 January 2025, receiving a consideration of Rupees Six Billion Five Hundred Million (LKR 6,5 Bn).

22.1 Profit for the year from discontinued operations

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Profits from operating activities, net of tax (100%)	–	–	–	2,755,853
Profit for the year from discontinued operations, net of tax (50%)	–	–	–	1,377,926
Sales proceed from sale of discontinued operation	6,500,000	–	6,500,000	–
Cost of investment	(755,000)	–	(5,480,475)	–
Tax on sale of discontinued operation	(726,257)	–	(667,736)	–
Other expenses on sale of discontinued operation	(50,827)	–	(50,827)	–
Profit attributable to equity holders for the year from discontinued operations, net of tax	4,967,916	–	300,962	1,377,926
Other comprehensive expenses attributable to equity holders for the year from discontinued operations, net of tax	–	–	–	(317,386)
Total comprehensive income attributable to equity holders from discontinued operations, net of tax	4,967,916	–	300,962	1,060,540

Accounting Policy

The Group presents basic and diluted EPS data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss that is attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss that is attributable to ordinary shareholders and the weighted-average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

23.1 Basic Earnings per Share

	BANK		GROUP
For the year ended 31 December	2025	2024	2025	2024
Profit attributable to equity holders of the Bank – continuing operations (LKR ’000)	11,060,321	8,352,531	11,067,822	8,399,590
Profit attributable to equity holders of the Bank – discontinued operations (LKR ’000)	4,967,916	–	300,962	1,377,926
Profit attributable to equity holders of the Bank – total (LKR ’000)	16,028,237	8,352,531	11,368,784	9,777,516
Weighted average number of ordinary shares	437,223,516	430,492,731	437,223,516	430,492,731

	BANK		GROUP
For the year ended 31 December	2025	2024	2025	2024
Basic earnings per ordinary share – continuing operations LKR	25.30	19.40	25.31	19.51
Basic earnings per ordinary share – discontinued operations LKR	11.36	–	0.69	3.20
Basic earnings per ordinary share – total LKR	36.66	19.40	26.00	22.71

23.2 Weighted average number of ordinary shares for basic earnings per share

	Outstanding number of shares		Weighted average number of shares
For the year ended 31 December	2025	2024	2025	2024
Number of shares in issue at 1 January	432,658,011	421,948,655	432,658,011	421,948,655
Number of shares satisfied in the form of issue and allotment of new shares from final dividend for 2024	5,746,239	10,709,356	4,565,505	8,544,076
Weighted average number of ordinary shares for basic earnings per ordinary share calculation	438,404,250	432,658,011	437,223,516	430,492,731

23.3 Diluted Earnings per Share

There was no dilution of ordinary shares outstanding. Therefore, diluted earnings per share is the same as basic earnings per share as shown in Note 23.1.

The Board of Directors of the Bank has approved the payment of a first and final dividend of LKR 7.50 per share which is to be satisfied in the form of cash and allotment of new ordinary shares for the year ended 31 December 2025. (The Bank approved a first and final dividend of LKR 6.00 per share which is to be satisfied in the form of cash and allotment of new ordinary shares for the year ended 31 December 2024).

	BANK
For the year ended 31 December	2025	2024
Dividend per share (LKR)	7.50	6.00

Compliance with Section 56 and 57 of Companies Act No. 7 of 2007

As required by Section 56 of the Companies Act No. 7 of 2007 the Board of Directors of the Bank satisfied the solvency test in accordance with Section 57, subject to relevant regulatory adherence, prior to declaring the final dividend. A statement of solvency duly completed and signed by the Directors on 24 February 2026 have been audited by Messrs KPMG.

Dividend paid during the Year

	BANK
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
First and final scrip dividend – LKR 2.00 per share (2024 – LKR 2.00)	735,519	843,897
First and final cash dividend paid – LKR 4.00 per share (2024 – LKR 3.00)	1,860,429	1,265,846

See accounting policies in Notes 5.3.

The following table provides a reconciliation between line items in the statement of financial position and categories of financial instruments.

		Bank				Group
As at 31 December 2025	Note	Fair value through profit or loss – mandatory LKR ’000	Fair value through other comprehensive income LKR ’000	Amortised cost LKR ’000	Total LKR ’000	Fair value through profit or loss – mandatory LKR ’000	Fair value through other comprehensive income LKR ’000	Amortised cost LKR ’000	Total LKR ’000
Financial Assets
Cash and cash equivalents	26	–	–	22,771,091	22,771,091	–	–	22,804,954	22,804,954
Balances with Central Bank of Sri Lanka	27	–	–	2,952,879	2,952,879	–	–	2,952,879	2,952,879
Placements with banks	28	–	–	37,442,912	37,442,912	–	–	37,442,912	37,442,912
Derivative financial assets	29	8,494,001	–	–	8,494,001	8,494,001	–	–	8,494,001
Financial assets measured at fair value through profit or loss	30	9,015,005	–	–	9,015,005	9,015,005	–	–	9,015,005
Financial assets at amortised cost – Loans and advances to customers	32	–	–	510,924,245	510,924,245	–	–	510,924,245	510,924,245
Financial assets measured at fair value through other comprehensive income – Loans and advances to customers	33		4,619,866		4,619,866		4,619,866		4,619,866
Financial assets at amortised cost – Debt and other instruments	34	–	–	114,795,690	114,795,690	–	–	114,804,987	114,804,987
Financial assets measured at fair value through other comprehensive income	35	–	124,552,817	–	124,552,817	–	124,552,817	–	124,552,817
Other assets	42	–	–	6,198,600	6,198,600	–	–	6,373,793	6,373,793
Total financial assets		17,509,006	129,172,683	695,085,417	841,767,106	17,509,006	129,172,683	695,303,770	841,985,459
Financial Liabilities
Due to banks	44	–	–	12,372,311	12,372,311	–	–	12,372,311	12,372,311
Derivative financial liabilities	29	201,000	–	–	201,000	201,000	–	–	201,000
Financial liabilities at amortised cost – Due to depositors	45	–	–	564,758,931	564,758,931	–	–	563,905,482	563,905,482
Financial liabilities at amortised cost – Due to other borrowers	46	–	–	134,354,757	134,354,757	–	–	134,363,917	134,363,917
Debt securities issued	47	–	–	12,286,859	12,286,859	–	–	12,286,859	12,286,859
Other liabilities and provisions	50	–	–	8,298,358	8,298,358	–	–	8,609,098	8,609,098
Subordinated term-debt	51	–	–	9,363,299	9,363,299	–	–	9,363,299	9,363,299
Total financial liabilities		201,000	–	741,434,515	741,635,515	201,000	–	740,900,966	741,101,966

		Bank				Group
As at 31 December 2024	Note	Fair value through profit or loss – mandatory LKR ’000	Fair value through other comprehensive income LKR ’000	Amortised cost LKR ’000	Total LKR ’000	Fair value through profit or loss – mandatory LKR ’000	Fair value through other comprehensive income LKR ’000	Amortised cost LKR ’000	Total LKR ’000
Financial assets
Cash and cash equivalents	26	–	–	13,504,806	13,504,806	–	–	13,523,475	13,523,475
Balances with Central Bank of Sri Lanka	27	–	–	2,328,346	2,328,346	–	–	2,328,346	2,328,346
Placements with banks	28	–	–	11,229,492	11,229,492	–	–	11,229,492	11,229,492
Derivative financial assets	29	9,643,442	–	–	9,643,442	9,643,442	–	–	9,643,442
Financial assets measured at fair value through profit or loss	30	7,416,018	–	–	7,416,018	7,416,018	–	–	7,416,018
Financial assets at amortised cost – Loans and advances to banks	31	–	–	1,500,338	1,500,338	–	–	1,500,338	1,500,338
Financial assets at amortised cost – Loans and advances to customers	32	–	–	395,047,053	395,047,053	–	–	395,047,053	395,047,053
Financial assets at amortised cost – Debt and other instruments	34	–	–	105,641,690	105,641,690	–	–	105,701,871	105,701,871
Financial assets measured at fair value through other comprehensive income	35	–	138,258,226	–	138,258,226	–	138,258,226	–	138,258,226

		Bank				Group
As at 31 December 2024	Note	Fair value through profit or loss – mandatory LKR ’000	Fair value through other comprehensive income LKR ’000	Amortised cost LKR ’000	Total LKR ’000	Fair value through profit or loss – mandatory LKR ’000	Fair value through other comprehensive income LKR ’000	Amortised cost LKR ’000	Total LKR ’000
Other assets	42	–	–	4,946,528	4,946,528	–	–	5,135,115	5,135,115
Total financial assets		17,059,460	138,258,226	534,198,253	689,515,939	17,059,460	138,258,226	534,465,690	689,783,376
Financial liabilities
Due to banks	44	–	–	7,149,474	7,149,474	–	–	7,149,474	7,149,474
Derivative financial liabilities	29	909,188	–	–	909,188	909,188	–	–	909,188
Financial liabilities at amortised cost – Due to depositors	45	–	–	465,153,180	465,153,180	–	–	464,359,564	464,359,564
Financial liabilities at amortised cost – Due to other borrowers	46	–	–	96,755,632	96,755,632	–	–	96,755,632	96,755,632
Debt securities issued	47	–	–	14,690,723	14,690,723	–	–	14,690,723	14,690,723
Other liabilities and provisions	50	–	–	7,441,320	7,441,320	–	–	7,719,982	7,719,982
Subordinated term debt	51	–	–	18,234,054	18,234,054	–	–	18,234,054	18,234,054
Total financial liabilities		909,188	–	609,424,383	610,333,571	909,188	–	608,909,429	609,818,617

Accounting Policy

Cash and cash equivalents include cash in hand, demand placements with banks and highly liquid financial assets with original maturities within three months or less from the date of acquisition that are subject to an insignificant risk of changes in fair value and are used by the Group in the management of its short-term commitments. These items are brought to Financial Statements at face values or the gross values, where appropriate.

Cash and cash equivalents are carried at amortised cost in the statement of financial position.

Statement of cash flows

The Statement of Cash Flows has been prepared by using the “Direct Method” of preparing cash flows in accordance with the Sri Lanka Accounting Standard – LKAS 7 on “Statement of Cash Flows”. A reconciliation of the profit for the year to operating cash flows before changes in operating assets and liabilities is also presented for comparability.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Cash in hand	14,619,367	10,487,340	14,631,326	10,487,990
Balances with banks	8,151,724	3,017,466	8,173,628	3,035,485
	22,771,091	13,504,806	22,804,954	13,523,475

26.1 Analysis by Currency

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Cash in hand	14,619,367	10,487,340	14,631,326	10,487,990
Held in local currency	14,379,385	10,340,257	14,391,344	10,340,907
Held in foreign currency	239,982	147,083	239,982	147,083
Balances with banks	8,151,724	3,017,466	8,173,628	3,035,485
Local banks	334,001	511,171	355,905	529,190
Foreign banks	7,817,723	2,506,295	7,817,723	2,506,295
	22,771,091	13,504,806	22,804,954	13,523,475

Accounting Policy

Balances with Central Banks are carried at amortised cost in the statement of financial position.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Statutory balances with Central Bank of Sri Lanka	2,952,879	2,328,346	2,952,879	2,328,346

As required by the provisions of Section 93 of Monetary Law Act, a minimum cash balance is maintained with the Central Bank of Sri Lanka. The minimum cash reserve requirement on rupee deposit liabilities is prescribed as a percentage of rupee deposit liabilities. The percentage varies from time to time. Applicable minimum ratio was 2% with effect from 16 August 2023. There are no reserve requirements for deposit liabilities of the Foreign Currency Banking Unit and foreign currency deposit liabilities in the Domestic Banking Unit.

See accounting policies in Note 9.4.1.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Central Bank of Sri Lanka	13,177,362	3,100,607	13,177,362	3,100,607
Axis Bank – IBU Gift City	2,277,647	593,894	2,277,647	593,894

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Bank Of Ceylon London	–	1,472,608	–	1,472,608
Cargills Bank PLC	627,608	–	627,608	–
Doha Bank Qatar	7,754,175	2,347,806	7,754,175	2,347,806
Mashreq Bank PSC Dubai UAE	–	2,059,076	–	2,059,076
Commercial Bank of Ceylon PLC	438,750	438,750	438,750	438,750
Standard Chartered Bank Singapore	42,683	35,879	42,683	35,879
Standard Chartered Bank London	317,604	299,960	317,604	299,960
National Bank of Ras Ai Khaimah	3,716,147	–	3,716,147	–
Bank Muscat	2,479,677	–	2,479,677	–
Pan Asia Bank PLC	2,715,316	880,912	2,715,316	880,912
Seylan Bank PLC	2,336,520	–	2,336,520	–
Union Bank of Colombo	1,559,423	–	1,559,423	–
Total	37,442,912	11,229,492	37,442,912	11,229,492

Accounting Policy

Derivative assets held-for-risk management purposes include all derivative assets that are not classified as trading assets and are measured at fair value in the Statement of Financial Position.

Policy applicable generally to hedging relationships

The Group designates certain derivatives held-for-risk management as well as certain non derivative financial instruments as hedging instruments in qualifying hedging relationships.

On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument and hedged item, including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both on inception of the hedging relationship and on an ongoing basis, of whether the hedging instrument is expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged item during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80 – 125%. For a cash flow hedge of a forecast transaction, the Group makes an assessment of whether the forecast transaction is highly probable to occur and presents an exposure to variations in cash flows that could ultimately affect profit or loss.

29.1 Cash Flow Hedge

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in OCI and presented in the hedging reserve within equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. The amount recognised in the hedging reserve is reclassified from OCI to profit or loss as a reclassification adjustment in the same period as the hedged cash flows affect profit or loss, and in the same line item in the income statement and OCI.

If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for cash flow hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. However, if the derivative is novated to a Central Counterparty (CCP) by both parties as a consequence of laws or regulations without changes in its terms except for those that are necessary for the novation, then the derivative is not considered expired or terminated. If the hedged cash flows are no longer expected to occur, then the Group immediately reclassifies the amount in the hedging reserve from OCI to profit or loss. For terminated hedging relationships, if the hedged cash flows are still expected to occur, then the amount accumulated in the hedging reserve is not reclassified until the hedged cash flows affect profit or loss. If the hedged cash flows are expected to affect profit or loss in multiple reporting periods, then the Group reclassifies the amount in the hedging reserve from OCI to profit or loss on a straight line basis.

The Bank uses Cross Currency Swaps (CCS) to hedge the interest rate risk and exchange rate risk arising from a floating rate borrowing denominated in foreign currencies. The hedging relationship is designated as cash flow hedge since the Bank is expecting to hedge the variability arise by the interest rate risk and exchange rate risk, where the USD borrowing can be identified as the hedged item, the CCS can be identified as the hedge instrument and interest rate risk and exchange rate risk can be identified as the hedged risk.

Derivatives are classified as assets, when their fair value is positive or as liabilities, when their fair value is negative. Derivative assets and liabilities arising from different transactions are only offset, if the transactions are with the same counterparty, a legal right of offset exists, and the parties intend to settle the cash flows on a net basis.

29.2 Fair Value Hedge of Foreign Exchange Risk

The Bank hedge the risk of variation in fair value of foreign currency denominated loans using foreign currency forwards from 1 January 2019. The risk management strategy is to use the foreign currency variability (gains/losses) arising because of revaluation of the foreign currency forwards, attributable to change in the spot foreign exchange rates, to off-set the variability, due to foreign exchange rate movements, in the value of USD denominated loans.

The hedged risk is the USD/LKR foreign exchange risk in the LKR conversion of USD denominated long-term liabilities. USD denominated long-term liabilities are designated as hedge item and forward contract that maturity, match with the tenure considered as a hedge instrument.

The Group’s approach to managing market risk, including foreign exchange risk, is discussed in Note 8.4. The Group’s exposure to foreign exchange risk is disclosed in Note 8.4.5.

By using derivative financial instruments to hedge exposures to changes in exchange rates, the Group also exposes itself to credit risk of the derivative counterparty, which is not offset by the hedged item. The Group minimises counterparty credit risk in derivative instruments by entering into transactions with high-reputed counterparties.

Before fair value hedge accounting is applied by the Group, the Group determines whether an economic relationship between the hedged item and the hedging instrument exists based on an evaluation of the qualitative characteristics of these items and the hedged risk that is supported by quantitative analysis. The Group considers whether the critical terms of the hedged item and hedging instrument closely align when assessing the presence of an economic relationship. The Group evaluates whether the fair value of the hedged item and the hedging instrument respond similarly to similar risks.

Under the Group policy, in order to conclude that a hedging relationship is effective, all the required criteria should be met.

29.3 Other Non-Trading Derivatives

Other non-trading derivatives are recognised on balance sheet at fair value. If a derivative is not held for trading, and is not designated in a qualifying hedging relationship, then all changes in its fair value are recognised immediately in profit or loss as a component of net income from other financial instruments at FVTPL.

29.4 Derivative Financial Assets/Liabilities

The following table describes the fair values of derivatives held-for-risk management purposes by type of instrument:

29.4.1 Assets

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Foreign currency derivatives
Currency swaps	8,486,354	9,527,979	8,486,354	9,527,979
Forward contracts	7,091	115,450	7,091	115,450
Spot contracts	556	13	556	13
	8,494,001	9,643,442	8,494,001	9,643,442

29.4.2 Liabilities

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Foreign currency derivatives
Interest rate swap	2,489	–	2,489	–
Currency swaps	145,095	852,241	145,095	852,241
Forward contracts	46,951	55,594	46,951	55,594
Spot contracts	6,465	1,353	6,465	1,353
	201,000	909,188	201,000	909,188

29.4.3 Hedge Accounting

		BANK
Hedging instruments Foreign currency risk	Line item in the statement of financial position	2025		2024
Hedging instruments Foreign currency risk	Line item in the statement of financial position	Asset LKR ’000	Amount set off in the income statements LKR ’000	Asset LKR ’000	Amount set off in the income statements LKR ’000
Fair value hedge
Hedge of foreign exchange risk arising from foreign currency denominated long-term liabilities using FX forwards.	Derivative assets (liabilities) held-for-risk management purposes	702,802	179,774	(714,583)	(459,000)
Cashflow Hedge
Hedge of foreign exchange risk arising from foreign currency denominated long term liabilities using FX forwards.	Derivative assets (liabilities) held-for-risk management purposes	7,735,676	1,181,813	9,449,283	5,930,375

In arriving the derivative asset, fair value of the derivative asset credit value adjustment have been considered.

The amount relating to items designated as hedged items are as follows:

Line item in the statement of financial position in which the hedged items are included.	2025		2024
	Carrying amount of liability LKR ’000	Amount set off in the income statement LKR ’000	Carrying amount of liability LKR ’000	Amount set off in the income statement LKR ’000
Due to other customers	50,983,873	157,776	43,481,880	(403,104)
Due to other borrowers	28,332,975	1,203,811	33,535,620	5,874,479
	79,316,848	1,361,587	77,017,500	5,471,375

Following table summarises the impact on the line items in the income statement.

Impact on income statement	2025			2024
Impact on income statement	Balance before the hedging adjustment LKR ’000	Hedging adjustment LKR ’000	Balance after the hedging adjustment LKR ’000	Balance before the hedging adjustment LKR ’000	Hedging adjustment LKR ’000	Balance after the hedging adjustment LKR ’000
Foreign exchange gain/(loss) (Note 13)	(2,401,656)	1,361,587	(1,040,069)	6,260,259	(5,471,375)	788,884

Accounting Policy

See accounting policies in Note 5.3.9.

Financial assets measured at FVTPL are measured initially at fair value and subsequently recorded in the statement of financial position at fair value. Changes in fair value are recognised in income statement.

		BANK/GROUP
As at 31 December	Note	2025 Fair value LKR ’000	2024 Fair value LKR ’000
Quoted equity securities	30.1	3,789,656	3,374,092
Quoted units in Unit Trust	30.2	–	–
Unquoted units in Unit Trust*	30.3	2,404,312	2,213,230
Treasury Bills		389,857	–
Treasury Bonds		2,431,180	1,828,696
		9,015,005	7,416,018

*The valuation of unquoted units in Unit Trust was carried out using publicly available information, in line with standard valuation practices.

30.1 Quoted Equity Securities – Bank/Group

As at 31 December	2025			2024
	Number of ordinary shares	Cost LKR ’000	Fair value LKR ’000	Number of ordinary shares	Cost LKR ’000	Fair value LKR ’000
Access Engineering PLC	2,688,674	170,357	197,080	4,377,012	114,606	151,007
ACL Cables PLC	3,010,163	172,205	270,313	1,765,747	166,459	209,241
Aitken Spence Hotel Holdings PLC	–	–	–	499,086	38,821	42,273

As at 31 December	2025			2024
	Number of ordinary shares	Cost LKR ’000	Fair value LKR ’000	Number of ordinary shares	Cost LKR ’000	Fair value LKR ’000
Aitken Spence PLC	787,867	100,779	123,104	900,000	115,817	130,500
Capital Alliance Holdings Limited	823,044	13,384	14,732	–	–	–
Central Finance Company PLC	287,607	72,114	77,079	433,894	48,404	82,440
Ceylon Cold Stores PLC	1,027,391	106,583	111,986	25,000	1,555	2,090
Chemical Industries (Colombo) Holdings PLC – Voting	600,000	20,020	20,880	20,000	1,820	1,880
Chemical Industries (Colombo) Holdings PLC – Non voting	813,820	16,911	21,241	465,000	29,704	31,155
Chevron Lubricants Lanka PLC	493,000	81,960	90,712	–	–	–
Commercial Credit and Finance PLC	171,762	18,718	21,685	974,975	35,099	55,574
Dialog Axiata PLC	1,613,235	47,884	48,074	3,211,548	35,299	37,575
Digital Mobility Solutions Lanka	710,000	98,650	105,968	–	–	–
Dipped Products PLC	4,251,322	248,589	259,756	2,048,323	105,983	111,634
Distilleries Company of Sri Lanka PLC	–	–	–	1,510,990	43,844	58,929
E. B. Creasy & Company PLC	440,000	28,600	28,512	–	–	–
Hatton National Bank PLC – Voting	–	–	–	2,425,391	518,069	775,519
Hatton National Bank PLC – Non voting	981,960	245,615	313,000	496,190	99,969	127,397
Haycarb PLC	7,977	847	852	73,428	6,018	6,263
Hayleys Fibre PLC	71,295	6,821	6,531	–	–	–
Hayleys PLC	1,836,165	243,545	359,429	1,104,791	105,814	145,004
Hemas Holdings PLC	1,386,543	39,336	48,113	1,423,642	124,752	146,991
HNB Finance – Voting	2,300,000	18,170	17,250	–	–	–
HNB Finance PLC – Non voting	3,500,000	22,750	26,600	–	–	–
JAT Holdings PLC	–	–	–	23,298	445	582
John Keells Holdings PLC	2,258,154	50,102	49,002	10,490,000	222,089	237,074
John Keells Hotels PLC	7,934,714	166,832	181,705	3,500,000	66,294	72,100
Lanka Aluminium Industries PLC	361,209	18,606	17,663	–	–	–
Laugfs Gas	677,660	43,798	48,588	–	–	–
LB Finance PLC	340,000	56,105	52,785	1,790,036	141,115	160,208

As at 31 December	2025			2024
	Number of ordinary shares	Cost LKR ’000	Fair value LKR ’000	Number of ordinary shares	Cost LKR ’000	Fair value LKR ’000
Melstacorp PLC	250,121	44,161	43,521	200,000	22,400	24,600
Merchant Bank of Sri Lanka & Finance	695,000	8,900	8,827	–	–	–
People's Insurance PLC	401,950	15,425	13,063	–	–	–
People's Leasing & Finance PLC	8,075,000	162,638	201,875	2,103,237	26,868	35,755
Royal Ceramic Lanka PLC	1,825,070	75,203	83,953	1,594,404	55,876	69,357
Sampath Bank PLC	–	–	–	2,367,691	189,200	279,979
Seylan Bank PLC – Voting	265,000	29,150	27,825	–	–	–
Seylan Bank PLC – Non voting	1,250,735	87,770	94,556	215,150	8,589	12,264
Sierra Cables PLC	400,000	9,898	14,120	–	–	–
Singer (Sri Lanka) PLC	1,143,365	73,686	100,273	–	–	–
Sunshine Holdings PLC	8,634,497	234,704	303,071	1,235,131	99,570	123,513
Swisstek Ceylon PLC	766,701	69,324	70,997	481,965	16,319	20,243
Tokyo Cement Company (Lanka) PLC – Voting	240,985	15,397	27,352	718,738	44,255	50,312
Tokyo Cement Company (Lanka) PLC – Non voting	75,000	5,698	7,110	876,020	45,716	53,350
Vallibel Finance PLC	735,000	86,485	76,808	840,000	42,251	44,772
Vallibel One PLC	1,185,561	99,682	117,133	1,141,096	64,348	74,511
WindForce PLC	1,869,006	79,241	86,535	–	–	–
		3,206,643	3,789,656		2,637,368	3,374,092

30.2 Quoted Units in Unit Trust – Bank/Group

As at 31 December	2025			2024
	Number of units	Cost LKR ’000	Fair value LKR ’000	Number of units	Cost LKR ’000	Fair value LKR ’000
NAMAL Acuity Value Fund	39,102	–	–	39,102	–	–

30.3 Unquoted Units in Unit Trust – Bank/Group

As at 31 December	2025			2024
	Number of units	Cost LKR ’000	Fair value LKR ’000	Number of units	Cost LKR ’000	Fair value LKR ’000
NAMAL Growth Fund	155,000	1,539	49,771	155,000	1,539	32,947
National Equity Fund	250,000	2,657	18,511	250,000	2,657	12,885
NDB Wealth Money Fund	61,704,589	2,000,000	2,336,031	61,704,589	2,000,000	2,167,398
		2,004,196	2,404,312		2,004,196	2,213,230

The valuation of unquoted unit trusts was carried out using publicly available information, in line with Standard valuation practices.

Accounting Policy

See accounting policies in Notes 5.3 and 16.

“Financial assets at amortised cost – Loans and advances to Banks” include amounts due from banks. As per SLFRS 9, loans and advances to Banks are assets that are held within a business model whose objective is to hold the assets in order to collect contractual cash flows and the contractual terms of the assets give rise on specific dates to cash flows that are solely payment of principal and interest on the principal outstanding.”

		BANK/GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000
Gross loans and advances	31.1	–	1,500,338
Accumulated impairment under Stage 1		–	–
Net loans and advances		–	1,500,338

31.1 Analysis

31.1.1 By Products

As at 31 December	2025 LKR ’000	2024 LKR ’000
Government of Sri Lanka Treasury Bills	–	1,500,338
Net loans and advances	–	1,500,338

31.1.2 By Currency

As at 31 December	2025 LKR ’000	2024 LKR ’000
Sri Lankan Rupee	–	1,500,338
Net loans and advances	–	1,500,338

Accounting Policy

See accounting policies in Notes 5.3 and 16.

Loans and advances to customers include loans and advances and lease receivables of the Group.

Principal amount of loans and advances (for example, over drawn balances in current account) are recognised when cash is advanced to a borrower. They are derecognised when either the borrower repays its obligations, or the loans are written-off, or substantially all the risks and rewards of ownership are transferred. They are initially recorded at fair value plus any directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest method, less any reduction for impairment or uncollectibility.

When the Bank is the lessor in a lease agreement that transfers substantially all of the risk and rewards incidental to the ownership of the asset to the lessee, the arrangement is classified as a finance lease and a receivable equal to the net investment in the lease is recognised and presented within loans and advances.

Loans and receivables from other customers are normally written off, either partially or in full, when there is no realistic prospect of recovery and all possible steps have been executed in recovering dues. Where loans are secured, this is generally after receipt of any proceeds from the realisation of the security. If the write-off is later recovered, the recovery is credited to “Net other operating income”.

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Gross loans and advances		558,990,709	440,906,944	558,990,709	440,906,944
Allowance for impairment	32.1.4	(48,066,464)	(45,859,891)	(48,066,464)	(45,859,891)
Net loans and advances		510,924,245	395,047,053	510,924,245	395,047,053
Gross loans and advances
Stage 1		431,305,737	306,777,253	431,305,736	306,777,253
Stage 2		53,924,348	65,522,918	53,924,348	65,522,918
Stage 3		73,760,624	68,606,773	73,760,624	68,606,773
		558,990,709	440,906,944	558,990,709	440,906,944
Allowance for impairment
Stage 1		3,835,956	3,412,778	3,835,956	3,412,778
Stage 2		3,572,259	5,930,684	3,572,259	5,930,684
Stage 3		40,658,249	36,516,429	40,658,249	36,516,429
		48,066,464	45,859,891	48,066,464	45,859,891
Net loans and advances		510,924,245	395,047,053	510,924,245	395,047,053

32.1 Analysis

32.1.1 By Product

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Overdrafts		66,566,414	58,520,136	66,566,414	58,520,136
Trade finance		95,008,175	64,742,144	95,008,175	64,742,144
Lease rentals receivables	32.1.1.1	35,710,221	25,898,216	35,710,221	25,898,216
Credit cards		9,929,497	7,716,549	9,929,497	7,716,549
Pawning		27,152,004	16,152,388	27,152,004	16,152,388
Staff loans		4,223,112	2,823,269	4,223,112	2,823,269
Term loans		320,246,248	260,803,279	320,246,248	260,803,279
Securities purchased under resale agreements		155,038	4,250,963	155,038	4,250,963
Gross loans and advances		558,990,709	440,906,944	558,990,709	440,906,944

32.1.1.1 Lease Rentals Receivable

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Gross investment in leases:
Lease rental receivables
– within one year		16,745,145	11,421,615	16,745,145	11,421,615
– after one year		26,977,729	20,479,763	26,977,729	20,479,763
		43,722,874	31,901,378	43,722,874	31,901,378
Less: deposit of rentals		6,736	9,804	6,736	9,804
Unearned income on rental receivables
– within one year		4,032,815	2,993,184	4,032,815	2,993,184
– after one year		3,973,102	3,000,174	3,973,102	3,000,174
		35,710,221	25,898,216	35,710,221	25,898,216

32.1.2 By Currency

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Sri Lankan Rupee	482,903,344	383,281,299	482,903,344	383,281,299
United States Dollar	74,918,835	56,510,580	74,918,835	56,510,580
Great Britain Pound	376,739	999,612	376,739	999,612
Australian Dollar	148,235	68,763	148,235	68,763
Euro	643,556	46,690	643,556	46,690
Gross loans and advances	558,990,709	440,906,944	558,990,709	440,906,944

32.1.3 By Industry

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Agriculture, forestry and fishing	53,727,184	49,197,555	53,727,184	49,197,555
Manufacturing	94,423,674	88,681,535	94,423,674	88,681,535
Tourism	17,012,462	18,595,720	17,012,462	18,595,720
Transportation and storage	12,433,282	11,338,122	12,433,282	11,338,122
Construction	43,746,801	34,847,510	43,746,801	34,847,510
Infrastructure development	35,510,340	33,449,191	35,510,340	33,449,191
Wholesale and retail trade	109,514,398	76,185,140	109,514,398	76,185,140
Information technology and communication services	6,324,402	4,772,162	6,324,402	4,772,162
Financial services	36,368,360	23,112,645	36,368,360	23,112,645
Professional, scientific and technical activities	4,010,686	1,888,835	4,010,686	1,888,835
Arts, entertainment and recreation	1,407,197	758,288	1,407,197	758,288
Education	4,007,600	3,932,564	4,007,600	3,932,564
Health care, social services and support services	8,086,893	6,791,645	8,086,893	6,791,645
Consumption	100,809,016	69,052,896	100,809,016	69,052,896
Lending to overseas entities	31,608,414	18,303,136	31,608,414	18,303,136
Gross loans and advances	558,990,709	440,906,944	558,990,709	440,906,944

ANALYSIS BY INDUSTRY

32.1.4 Movements in Impairment during the Year

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Stage 1
Balance at 1 January	3,412,778	3,500,658
Charge/(Reversal) to income statement	423,178	(87,880)
Write-off during the year	–	–
Balance as at 31 December	3,835,956	3,412,778
Stage 2
Balance at 1 January	5,930,684	7,235,925
Reversal to income statement	(2,358,425)	(1,305,241)
Write-off during the year	–	–
Balance as at 31 December	3,572,259	5,930,684
Stage 3

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	36,516,429	35,180,673
Charge to income statement	6,726,680	4,671,368
Effect of foreign currency and other movement	235,206	(380,398)
Write-off during the year	(2,820,066)	(2,955,214)
Balance as at 31 December	40,658,249	36,516,429
Total impairment	48,066,464	45,859,891

Key judgements and estimates

In estimating collectively assessed ECL, the Bank makes judgements and assumptions in relation to:

The selection of an estimation technique or modelling methodology, noting that the modelling of the Group’s ECL estimates are complex; and
The selection of inputs for those models, and the interdependencies between those inputs.

The following table summarises the key judgements and assumptions used by the Bank in relation to the ECL model inputs, the interdependencies between those inputs, and highlights the significant changes during the current year.

The judgments applied and the associated assumptions have been made in the context of the ongoing economic revival and the normalisation of macroeconomic conditions, after incorporating the overall impact of Cyclone Ditwah. These judgments reflect historical experience and other relevant factors, including forward looking expectations that management considers reasonable under the circumstances. Such factors have been taken into account in determining the impairment provisions recognised during the year.

Judgement/Assumption	Description	Considerations for the year ended 31 December 2025
Determining when a significant Increase in Credit Risk (SICR) has occurred	In the measurement of ECL, judgement is involved in setting the rules and trigger points to determine whether there has been a SICR since initial recognition of a loan, which would result in the financial asset moving from “Stage 1” to “Stage 2”. This is a key area of judgement since transition from Stage 1 to Stage 2 increases the ECL from an allowance based on the probability of default in the next 12 months, to an allowance for lifetime expected credit losses.	Following the impact of the recent cyclone Ditwah, the Central Bank of Sri Lanka issued a circular directing financial institutions to grant relief measures to affected customers. In compliance with this guidance, the Bank extended appropriate assistance and undertook comprehensive assessments to determine whether a Significant Increase in Credit Risk (SICR) had occurred for the customers who received concessions. These assessments were carried out based on discussions with customers regarding their projected business cash flows, financial position, the sectors in which they operate, and their capacity to recommence loan repayments at the end of the moratorium or concessionary period.
Measuring both 12-month and lifetime credit losses	The probability of default (PD), loss given default (LGD) and exposure at default (EAD) credit risk parameters used in determining ECL are point-in-time measures reflecting the relevant forward looking information determined by management. Judgement is involved in determining which forward-looking information variables are relevant for particular lending portfolios and for determining each portfolio’s point-in-time sensitivity.	The PD, EAD and LGD models are subject to the Bank’s policy on impairment model that stipulates periodic model monitoring, periodic revalidation and the approval procedures and authorities according to model materiality.
Measuring both 12-month and lifetime credit losses		There were no material changes to the policies during the year ended 31 December 2025.
Base case economic forecast	The Bank derives a forward-looking “base case” economic scenario which reflects the Bank’s view of the most likely future macro-economic conditions.	There have been no changes to the types of forward-looking variables (key economic drivers) used as model inputs in the current year.
Base case economic forecast		As at 31 December 2025, the base case assumptions have been updated to reflect the continued recovery of the Sri Lankan economy, incorporating the latest macroeconomic forecasts that indicate a stabilised and improving operating environment.
Probability weighting of each economic scenario (base case, best and worst scenarios)	Probability weighting of each economic scenario is determined by management considering the risks and uncertainties surrounding the base case economic scenario at each measurement date.	The key consideration for probability weightings in the current period is the continued recovery and stabilisation of the Sri Lankan economy. Reflecting the improved macroeconomic outlook and the reduction in downside risks, the Bank has applied only a moderate weighting (35%) to the worst case scenario, with the base case now carrying a higher level of confidence. Although the economic environment has become more predictable compared to prior years, the assigned probability weightings still involve a degree of judgement.

Judgement/Assumption	Description	Considerations for the year ended 31 December 2025
Management temporary adjustments	Management temporary adjustments to the ECL allowance are used in circumstances where it is judged that the existing inputs, assumptions and model techniques do not capture all the risk factors relevant to Group’s lending portfolios. Emerging local or global macroeconomic, microeconomic or political events, and natural disasters that are not incorporated into the current parameters, risk ratings, or forward-looking information are examples of such circumstances. The use of management temporary adjustments may impact the amount of ECL recognised.	In the current year, Management has applied additional judgmental adjustments to the ECL to capture the potential impact of Cyclone Ditwah and other risk elevated factors identified by the Bank. These management overlays have been recognised to ensure that risks not fully reflected in the statistical models particularly those arising from recent environmental events and sector specific vulnerabilities are appropriately provided for. The application of these overlays reflects Management’s prudent approach to incorporating emerging risks into the Bank’s expected credit loss assessment.
Management temporary adjustments	While the economic environment has stabilised and no longer reflects the crisis related uncertainties seen in prior years, the Bank recognises that certain risks arising from unexpected future circumstances may not be fully captured within the existing ECL models. Accordingly, management has applied judgmental overlays to ensure that the allowance for expected credit losses remains appropriate, taking into account emerging risk factors and areas where model limitations may prevent the full reflection of potential future credit impacts.

Accounting Policy

See accounting policies in Note 5.3.

Loans to and receivables from other customers include loans and advances and lease receivables of the Group.

Loans classified as Fair Value Through Other Comprehensive Income (FVOCI) represent debt instruments of the Group that meet the criteria of being held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets. These loans are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value, with interest income recognised in profit or loss using the effective interest method, and impairment allowances recognised in profit or loss in accordance with the Expected Credit Loss (ECL) model.

Changes in the fair value of these loans, other than those relating to impairment and foreign exchange gains or losses, are recognised in Other Comprehensive Income (OCI). Upon derecognition, the cumulative fair value changes previously recognised in OCI are reclassified to profit or loss. The contractual cash flows of these loans represent solely payments of principal and interest (SPPI) consistent with their classification under IFRS 9.

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Gross loans and advances		4,605,823	–	4,605,823	–
Fair value adjustment		40,490	–	40,490	–
Allowance for impairment	33.1.4	(26,447)	–	(26,447)	–
Net loans and advances		4,619,866	–	4,619,866	–
Gross loans and advances
Stage 1		4,605,823		4,605,823
Stage 2		–		–
Stage 3		–		–
		4,605,823		4,605,823

33.1 Analysis

33.1.1 By Product

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Term loans	4,605,823	–	4,605,823	–
Gross loans and advances	4,605,823	–	4,605,823	–

33.1.2 By Currency

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
United States Dollar	4,605,823	–	4,605,823	–

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Gross loans and advances	4,605,823	–	4,605,823	–

33.1.3 By Industry

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Lending to overseas entities	4,605,823	–	4,605,823	–
Gross loans and advances	4,605,823	–	4,605,823	–

33.1.4 Movements in impairment during the year

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Stage 1
Balance at 1 January	–	–	–	–
Charge to income statement	26,447	–	26,447	–
Write-off during the year	–	–	–	–
Other movements	–	–	–	–
Balance as at 31 December	26,447	–	26,447	–

Accounting Policy

See accounting policies in Notes 5.3 and 16.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

		BANK
As at 31 December		2025			2024
	Note	Stage 1 LKR ’000	Stage 2 LKR ’000	Total LKR ’000	Stage 1 LKR ’000	Stage 2 LKR ’000	Total LKR ’000
Sri Lanka Government Securities
Government of Sri Lanka treasury bonds	34.2	114,578,865	–	114,578,865	105,424,311	–	105,424,311
Government of Sri Lanka sovereign bonds	34.1	–	–	–	–	–	–
Other Investments
Quoted debentures	34.3	217,340	–	217,340	217,398	–	217,398
Allowance for Impairment on financial assets at amortised cost – debt and other instruments	34.4	(515)	–	(515)	(19)	–	(19)
Total		114,795,690	–	114,795,690	105,641,690	–	105,641,690

As explained in Note 4, Sri Lanka has been recovering from a very challenging economic situation. A key milestone in this recovery process has been the successful restructuring of the International Sovereign Bonds (ISBs), which has alleviated the debt burden and restored fiscal credibility. The positive trends in inflation, exchange rates, and interest rates, coupled with a revived tourism industry, signal a healthy macroeconomic environment and strong prospects for sustained economic growth. The banking sector also saw an improvement in non-performing loans, reflecting gradual stabilisation, although overall levels remained higher than pre-crisis benchmarks.

With these positive trends and improvements, there is no any concerns over the government’s ability to continue to repay the principal and interest on local currency denominated treasury bills and bonds. Further the Banking Act Direction No. 14 of 2021,

Classification, Recognition, and Measurement of Financial Assets Other than Credit Facilities in Licensed Banks, issued by the Monetary Board, Central Bank of Sri Lanka requires LGD of zero to be applied to these government securities. Accordingly, the Bank’s overall Expected Credit Loss (ECL) on these instruments has been considered to be effectively zero. T bills and T bonds continue to remain under Stage 1.

		GROUP
As at 31 December		2025			2024
	Note	Stage 1 LKR ’000	Stage 2 LKR ’000	Total LKR ’000	Stage 1 LKR ’000	Stage 2 LKR ’000	Total LKR ’000
Sri Lanka Government securities
Government of Sri Lanka treasury bonds	34.2	114,578,865	–	114,578,865	105,475,195	–	105,475,195
Government of Sri Lanka sovereign bonds	34.1	–	–	–	–	–	–
Other Investments				–	–	–	–
Quoted debentures	34.3	226,637	–	226,637	226,695	–	226,695
Allowance for Impairment on financial assets at amortised cost – debt and other instruments	34.4	(515)	–	(515)	(19)	–	(19)
		114,804,987	–	114,804,987	105,701,871	–	105,701,871

34.1 Government of Sri Lanka Sovereign Bonds

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	–	4,593,551
Transfer From fair value through other comprehensive income	–	–
Coupon accrual/discount amortisation	–	–
Disposed	–	(341,273)
Transfers to other assets (Matured)*	–	(4,252,278)
Exchange gain	–	–
Balance at 31 December	–	–

*Matured SL ISB’s were transferred to other assets.

34.2 government of sri lanka treasury bonds

34.2.1 By Collateralisation

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Pledged as collateral	81,405,091	44,781,623	81,405,091	44,781,623
Unencumbered	33,391,114	60,860,086	33,400,411	60,920,267
	114,796,205	105,641,709	114,805,502	105,701,890

34.2.2 By Currency

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Sri Lankan Rupee	114,796,205	105,641,709	114,805,502	105,701,890
	114,796,205	105,641,709	114,805,502	105,701,890

34.3 Quoted Debentures

As at 31 December	2025		2024
	Number of debentures	Cost of investment LKR ’000	Number of debentures	Cost of investment LKR ’000
Lanka Orix Leasing Company PLC	2,000,000	217,340	2,000,000	217,398
Total investments in quoted debentures – Bank		217,340		217,398
Sampath Bank PLC	74,600	9,297	74,600	9,297
Total investments in quoted debentures – Group		226,637		226,695

34.4 Movement in Impairment during the Year

		BANK/GROUP
As at 31 December	Notes	2025 LKR ’000			2024 LKR ’000
Stage 1		Stage 1	Stage 2	Total	Stage 01	Stage 02	Total
Balance at 1 January		19	–	19	19	2,296,775	2,296,794
Matured	42.1.1	–	–	–	–	(2,109,075)	(2,109,075)
Disposed	14.1.1	–	–	–	–	(187,700)	(187,700)
Exchange rate impact		–	–	–	–	–	–

		BANK/GROUP
As at 31 December	Notes	2025 LKR ’000			2024 LKR ’000
Charge to the income statement	16.2	496	–	496	–	–	–
Reversal with the disposal		–	–	0	–	–	–
Balance at 31 December		515	–	515	19	–	19

The Bank’s total exposure to unmatured ISBs and SLDBs are presented in Note 32.1. The main uncertainties regarding the estimations for the recoverability of the Bank’s total exposure relate to the debt service capacity of the government of Sri Lanka, which, in turn, is affected by the development of the prevailing macroeconomic environment as well as by the levels of liquidity of the Government and the outcome of the debt restructuring negotiations with the International Monetary Fund (IMF) and the resultant comprehensive debt restructuring programme. Due to the uncertainties relating to the above, the Bank has used significant judgement using the information available as at reporting date to estimate the recoverable value. Accordingly, an impairment charge has been recognised based on the expected recoverable value.

34.4.1 Reclassifications of Financial Instrument

Considering the unprecedented changes in the macro-economic conditions, the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) has decided to issue the “Statement of Alternative Treatment (SoAT) on Reclassification of Debt Portfolio”. This SoAT will provide a temporary practical expedient to permit the entities to reclassify the debt portfolio measured at fair value through Other Comprehensive Income (FVTOCI) to amortised cost.

The Bank used this option to reclassify long term debt instruments subsequent to the initial recognition. The fair value of the debt portfolio reclassified during year 2022 and remaining as at 31 December 2025 amounted to LKR 5.5 Bn and cumulative fair value gain thereon amounted to LKR 0.1 Bn (net of tax LKR 0.1 Bn).

Accounting Policy

See accounting policies in Notes 5.3 and 16.

A financial asset is measured at fair value through other comprehensive income (FVOCI) only if it meets both of the following conditions and is not designated as FVTPL:

The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition of an equity instrument that is not held for trading, the Group may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment – by investment basis.

		BANK		GROUP
As at 31 December	Note	2025 Fair value LKR ’000	2024 Fair value LKR ’000	2025 Fair value LKR ’000	2024 Fair value LKR ’000
Equity Securities
Quoted	35.2	31,212,665	24,293,516	31,212,665	24,293,516
Unquoted	35.3	332,064	270,193	332,064	270,193
		31,544,728	24,563,709	31,544,729	24,563,709

		BANK		GROUP
As at 31 December	Note	2025 Fair value Stage 1 LKR ’000	2024 Fair value Stage 1 LKR ’000	2025 Fair value Stage 1 LKR ’000	2024 Fair value Stage 1 LKR ’000
Government Securities
Government of Sri Lanka Treasury bills		13,944,693	53,262,744	13,944,693	53,262,744
Government of Sri Lanka Treasury bonds		70,306,354	59,836,484	70,306,354	59,836,484
PDI bonds	35.1	5,473,438	–	5,473,438	–
		89,724,485	113,099,228	89,724,485	113,099,228
US Securities
US Treasury bonds	35.5	1,569,429	595,289	1,569,429	595,289
US Treasury bonds		1,569,429	595,289	1,569,429	595,289
Other Investments
Quoted debentures	35.6	1,714,175	–	1,714,175	–
		1,714,175	–	1,714,175	–
		93,008,089	113,694,517	93,008,089	113,694,517
Total		124,552,817	138,258,226	124,552,817	138,258,226

35.1 PDI bonds

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	–	–
Purchased during the year	5,934,304	–
Matured during the year	(895,140)	–
Accrued interest	200,494	–
Fair value changers	137,041	–
Impairment provision	(86,257)	–
Exchange gain	182,996	–
Balance at 31 December	5,473,438	–

35.2 Quoted Ordinary Shares

As at 31 December	2025			2024
	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000
Banks
Commercial Bank of Ceylon PLC – voting	148,302,476	10,015,509	29,771,722	147,220,542	9,807,934	21,310,173
Commercial Bank of Ceylon PLC – Non voting	388,518	30,344	74,013	383,455	29,692	44,289
Hatton National Bank PLC – Voting	–	–	–	589,755	116,870	188,574
Hatton National Bank PLC – Non voting	123,900	19,757	39,493	435,463	69,437	111,805
National Development Bank PLC	–	–	–	3,687,019	511,708	417,555
Seylan Bank PLC – Non voting	–	–	–	103,774	4,187	5,915
		10,065,609	29,885,228		10,539,828	22,078,311
Diversified Financials
Capital Alliance Holdings Limited	368,000	3,680	6,587	–	–	–
Ceylon Guardian Investment Trust PLC	–	–	–	40,886	1,589	6,440
Ceylon Investment PLC	–	–	–	92,797	3,046	6,811
LB Finance PLC	1,529,567	142,836	237,465	–	–	–
Vallibel Finance PLC	568,941	35,210	59,454	–	–	–
		181,726	303,507		4,635	13,251
Insurance
Ceylinco Holdings PLC	12,000	39,437	38,400	–	–	–

As at 31 December	2025			2024
	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000
		39,437	38,400		–	–
Real Estate Management and Development
Prime Lands Residencies PLC	–	–	–	1,500,000	13,798	18,000
		–	–		13,798	18,000
Consumer Services
John Keells Hotels PLC	5,258,686	108,747	120,424	2,500,000	43,128	51,500
		108,747	120,424		43,128	51,500
Telecommunications
Dialog Axiata PLC	–	–	–	9,201,670	94,653	107,660
		–	–		94,653	107,660
Capital Goods
Access Engineering PLC	–	–	–	2,100,000	51,256	72,450
ACL Cables PLC	–	–	–	717,845	57,415	85,065
Aitken Spence Hotel Holdings PLC	500,000	43,601	56,625	–	–	–
Hayleys PLC	–	–	–	1,621,098	141,686	212,769
Hemas Holdings PLC	1,914,665	35,507	66,439	2,393,726	173,210	247,152
John Keells Holdings PLC	3,838,587	64,559	83,297	17,064,410	286,996	385,656
Lanka Tiles PLC	313,335	15,168	15,635	313,335	15,168	18,299
Richard Pieris & Company PLC	–	–	–	2,000,000	46,216	51,200
Royal Ceramics Lanka PLC	2,501,839	98,986	115,085	2,585,000	102,277	112,448
Vallibel One PLC	342,907	22,904	33,879	–	–	–
		280,726	370,960		874,224	1,185,039
Consumer Durables & Apparel
Hayleys Fabric PLC	90,000	3,616	3,663	690,477	27,742	37,976
		3,616	3,663		27,742	37,976
Materials
Agstar PLC	–	–	–	1,375,869	24,120	11,420
Chemical Industries (Colombo) PLC – voting	–	–	–	643,750	24,971	60,513
Chemical Industries (Colombo) PLC – Non voting	2,547,855	41,314	66,499	1,630,000	62,259	109,210
Dipped Products PLC	1,590,000	90,710	97,149	–	–	–
Haycarb PLC	273,712	24,143	29,219	1,000,000	88,208	85,300
JAT Holdings PLC	–	–	–	191,658	4,338	4,791
Swisstek Ceylon PLC	–	–	–	597,889	13,854	25,111
Tokyo Cement Company (Lanka) PLC – Voting	–	–	–	3,087,442	156,553	216,121
Tokyo Cement Company (Lanka) PLC – Non voting	–	–	–	1,871,026	71,380	113,945

As at 31 December	2025			2024
	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000
		156,167	192,867		445,683	626,411
Food Beverage and Tobacco
Ceylon Cold Stores PLC	501,537	38,899	54,668	225,000	13,691	18,810
Melstacorp Ltd	–	–	–	–	–	–
Sunshine Holdings PLC	2,989,596	67,890	104,935	97,399	5,742	9,740
		106,789	159,602		19,433	28,550
Energy
Lanka IOC PLC	–	–	–	399,354	80,580	50,218
		–	–		80,580	50,218
UTILITIES
Vallibel Power Erathna PLC	9,325,256	74,505	138,014	8,400,000	57,433	96,600
		74,505	138,014		57,433	96,600
Total quoted ordinary shares – Bank		11,017,322	31,212,665		12,201,137	24,293,516
Commercial Bank of Ceylon PLC – Equity Adjustment**		1,164,773	–		1,454,863	–
Total quoted ordinary shares – Group		12,182,095	31,212,665		13,656,000	24,293,516

Sector classification and fair value per share are based on the list published by Colombo Stock Exchange, as at the reporting date.

* Cost is reduced by write-off of diminution in value other than temporary in respect of Investments.

** During the year 2010, the status of the investment in equity capital of Commercial Bank of Ceylon PLC changed from an associate to investment security. At the time of change, carrying value of the Group including cumulative post acquisition reserves was considered as the cost of the investment.

35.3 Unquoted Ordinary Shares

As at 31 December	2025			2024
	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000
Credit Information Bureau of Sri Lanka	9,184	918	230,071	9,184	918	216,559
Lanka Clear (Private) Limited	100,000	1,000	39,100	100,000	1,000	33,470
Lanka Financial Services Bureau Limited	200,000	2,000	–	200,000	2,000	20

As at 31 December	2025			2024
	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000	Number of ordinary shares	Cost* LKR ’000	Fair value LKR ’000
Samson Reclaim Rubber Limited	116,700	–	25,439	116,700	–	–
Society for Worldwide Interbank Financial Telecommunication	6	3,385	20,422	6	3,385	3,385
Sun Tan Beach Resorts Limited	9,059,013	–	17,031	9,059,013	–	16,759
The Video Team (Private) Limited	30,000	–	–	30,000	–	–
Total unquoted ordinary shares – Bank/Group		7,303	332,064		7,303	270,193

* Cost is reduced by write off of diminution in value other than temporary in respect of Investments.

35.4 Government of Sri Lanka Treasury Bills and Treasury Bonds

35.4.1 By collateralisation

	BANK		GROUP
As at 31 December	2025 Fair value LKR ’000	2024 Fair value LKR ’000	2025 Fair value LKR ’000	2024 Fair value LKR ’000
Pledged as collateral	12,665,500	6,232,257	12,665,500	6,232,257
Unencumbered	77,058,985	106,866,971	77,058,985	106,866,971
	89,724,485	113,099,228	89,724,485	113,099,228

35.4.2 By Currency

	BANK		GROUP
As at 31 December	2025 Fair value LKR ’000	2024 Fair value LKR ’000	2025 Fair value LKR ’000	2024 Fair value LKR ’000
Sri Lankan Rupee	84,251,047	113,099,228	84,251,047	113,099,228
United States Dollar	5,473,438	–	5,473,438	–
	89,724,485	113,099,228	89,724,485	113,099,228

35.5 US Treasury Bonds

35.5.1 By Collateralisation

	BANK		GROUP
As at 31 December	2025 Fair value LKR ’000	2024 Fair value LKR ’000	2025 Fair value LKR ’000	2024 Fair value LKR ’000
Unencumbered	1,569,429	595,289	1,569,429	595,289

35.5.2 By Currency

	BANK		GROUP
As at 31 December	2025 Fair value LKR ’000	2024 Fair value LKR ’000	2025 Fair value LKR ’000	2024 Fair value LKR ’000
United States Dollar	1,569,429	595,289	1,569,429	595,289

35.6 Quoted Debentures

	BANK/GROUP
As at 31 December	2025		2024
	Number of debentures	Fair value LKR ’000	Number of debentures	Fair value LKR ’000
Fintrex Finance Limited	1,000,000	103,987	–	–
Siyapatha Finance Limited	5,000,000	528,746	–	–
Alliance Finance Company PLC	8,000,000	830,224	–	–
Assetline Finance Limited	2,500,000	251,218	–	–
Total investments in quoted debentures	16,500,000	1,714,175	–	–

Accounting Policy

“Subsidiaries” are entities controlled by the Group. The Group “controls” an entity if it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group reassesses whether it has control if there are changes to one or more of the elements of control. This includes circumstances in which protective rights held (e.g. those resulting from a lending relationship) become substantive and lead to the Group having power over an investee.

The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

Bank’s investments in subsidiaries are stated at cost less impairment losses. Reversals of impairment losses are recognised in the income statement, if there has been a change in the estimates used to determine the recoverable amount of the investment.

As at 31 December			2025		2024
	Holdings %	Number of shares	Cost LKR ’000	Market value*/ Directors’ valuation LKR ’000	Cost LKR ’000	Market value*/ Directors’ valuation LKR ’000
Unquoted
DFCC Consulting (Pvt) Limited	100.00	500,000	5,000	8,842	5,000	83,865
Lanka Industrial Estates Limited	51.16	204,230,000	97,035	565,983	97,035	467,557
Synapsys Limited	100.00	31,216,649	135,000	240,701	135,000	225,053
			237,035	815,526	237,035	776,475

*Market value is arrived by using the audited financial statements as at reporting date.

Accounting Policy

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.

Interest in associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs and attributable goodwill. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and OCI of equity-accounted investees, until the date on which significant influence ceases.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
National Asset Management Limited (Ownership 30%)
Balance at 1 January	33,169	33,169	38,597	36,844
Share of profit after tax	–	–	3,100	1,536
Share of other comprehensive expenses	–	–	179	217
Balance at 31 December	33,169	33,169	41,876	38,597

37.1 Summarised Financial Information of Associate

As at 31 December	2025 LKR ’000	2024 LKR ’000
Percentage ownership interest (%)	30	30
Non-current assets	11,938	15,442
Current assets	147,304	132,380
Non-current liabilities	(3,804)	(10,981)

As at 31 December	2025 LKR ’000	2024 LKR ’000
Current liabilities	(15,901)	(8,235)
Net assets (100%)	139,537	128,606
Group’s share of net assets (30%)	41,861	38,582
Goodwill on acquisition	15	15
Adjusted Group’s share of net assets (30%)	41,876	38,597

For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
Revenue	72,289	56,835
Profit after tax (100%)	10,334	5,120
Other comprehensive income (100%)	596	725
Total comprehensive income (100%)	10,930	5,845
Group’s share in profit	3,100	1,536
Group’s share in other comprehensive income	179	217
Group’s share in total comprehensive income	3,279	1,753
Contingent liabilities of equity accounted investee	Nil	Nil
Capital and other commitments of equity accounted investee	Nil	Nil

There are no restrictions on the ability of the associate to transfer funds to the investor in the form of cash dividends, or repayment of loans or advances.

The Bank has neither contingent liabilities nor capital and other commitments towards its associate company.

Accounting Policy

Investment property of the Bank/Group is held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business. The Bank/Group has chosen the cost model instead of fair value model and therefore investment property is measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the investment property.

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in the Income Statement.

Depreciation is provided on a straight line basis over the estimated life of the class of asset from the date of purchase up to the date of disposal. The useful life for the current and comparative periods of significant items of investment property are as follow:

Building –

20-40 years

Land are not depreciated.

Rental income from investment property is recognised as other revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Cost
Balance at 1 January	9,879	9,879	825,317	768,359
Acquisition	–	–	213,523	135,870
Transferred to property, plant and equipment	–	–	(80,565)	(78,912)
Reclassified to property plant and equipment	–	–	(11,549)	–
Cost as at 31 December	9,879	9,879	946,726	825,317
Less: Accumulated depreciation
Balance at 1 January	–	–	335,248	299,974
Charge for the year	–	–	13,312	35,274
Accumulated depreciation as at 31 December	–		348,560	335,248
Carrying amount as at 31 December	9,879	9,879	598,166	490,069

38.1 Details of Investment Properties

As at 31 December	2025
As at 31 December	Buildings sq. ft.	Extent of land Perches*	Number of buildings	Cost LKR ’000	Accumulated depreciation/ impairment LKR ’000	Net book value LKR ’000	Fair value LKR ’000	Date of valuation
4A, 4th Cross Lane, Borupana, Ratmalana	–	20.0	–	2,600	–	2,600	45,000	11.10.2025
259/30, Kandy Road, Bambarakelle, Nuwara-Eliya	–	93.5	–	7,279	–	7,279	121,500	06.02.2025
Bank				9,879	–	9,879	166,500
Pattiwila Road, Sapugaskanda, Makola	576,119	21,920	41	936,847	348,560	588,277	10,778,300	31.12.2025
Group				946,726	348,560	598,166	10,944,800

* 1 perch = 25.2929 m2 ; 1sq.ft = 0.0929 m2

The fair value of investment property situated at Pattiwila Road, Sapugaskanda, Makola was based on market valuations carried out on 31 December 2025 by Mr C W G Abeygunawardene, Chartered Valuation Surveyor, a professional valuer.

The fair value of investment properties situated at Borupana, Ratmalana and Bambarakelle, Nuwara-Eliya was valued by
Mr A A M Fathihu – Former Government Chief Valuer and Mr J S M I B Karunatilaka, Fellow Member of the Institute of Valuers of Sri Lanka.

38.2 Amounts Recognised in profit or loss

Rental income from investment property of Group for 2025 – LKR 520 Mn (2024 – LKR 472 Mn)

Operating expenses on investment property of Group for 2025 – LKR 95 Mn (2024 – LKR 102 Mn)

Accounting Policy

Recognition and Measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset.

Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in the income statement.

Subsequent Costs

Subsequent expenditure is capitalised only when its probable that the future economic benefits of the expenditure will flow to the Bank. Ongoing repairs and maintenance costs are expensed as incurred.

Capital Work-in-Progress

There are expenses of a capital nature directly incurred in the construction of buildings, major plant and machinery and system development, awaiting capitalisation. These are stated in the Statement of Financial Position at cost. Capital work-in-progress would be transferred to the relevant asset when it is available for use i.e. When it is in the location and condition necessary for it to be capable of operating in the manner intended by the Management. Capital work-in-progress is stated at cost less any accumulated impairment losses.

Depreciation

Items of property, plant and equipment are depreciated from the month they are available-for-use up to the month of disposal. Depreciation is calculated to write-off the cost of items of property, plant and equipment less their estimated residual values using the straight-line basis over their estimated useful lives. Land is not depreciated.

The estimated useful lives for the current and comparative periods of significant items of property, plant and equipment are as follows:

	Years
Buildings	20-40
Office equipment and motor vehicles	3-5
Fixtures and fittings	10

Derecognition

The carrying amount of property and equipment is de-recognised on disposal or when non future economic benefits are expected from its use of the gain or loss arising from the de-recognition (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in the income statement.

Reclassification to Investment Property

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified accordingly. Any gain arising on this remeasurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in OCI and presented in the revaluation reserve. Any loss is recognised in profit or loss.

39.1 Reconciliation of Carrying Amount – Bank

	Land and building LKR ’000	Improvements to leasehold lands LKR ’000	Right-of- use asset LKR ’000	Office equipment LKR ’000	Furniture and fittings LKR ’000	Motor vehicles LKR ’000	Total 31 December 2025 LKR ’000	Total 31 December 2024 LKR ’000
Cost at 1 January	1,250,579	15,613	2,649,811	4,263,106	1,837,033	233,161	10,249,303	9,045,498
Acquisitions	16,806	6,955	389,578	993,280	157,717	41,886	1,606,223	1,268,196
Less: Disposals	63	–	12,260	2,646	36,533	11,036	62,538	64,391
Cost at 31 December	1,267,322	22,568	3,027,129	5,253,740	1,958,217	264,011	11,792,988	10,249,303
Accumulated depreciation at 1 January	363,492	5,223	1,501,580	3,083,672	1,189,522	233,160	6,376,649	5,545,760
Depreciation for the year	32,461	4,015	320,636	479,141	117,139	2,094	955,486	831,768
Less: Accumulated depreciation on disposals	58	–	–	2,646	34,131	11,036	47,871	879
Accumulated depreciation at 31 December	395,895	9,237	1,822,216	3,560,167	1,272,531	224,218	7,284,264	6,376,649
Carrying value at 31 December	871,427	13,331	1,204,913	1,693,573	685,687	39,793	4,508,724	3,872,654

39.1.1 List of Freehold Land and Building

	Number of buildings and land holdings	Building sq. ft.	Extent of land Perches*	Cost LKR ’000	Accumulated depreciation LKR ’000	Carrying value LKR ’000
73/5, Galle Road, Colombo 3	1	57,190	106.61	191,589	96,740	94,849
5, Deva Veediya, Kandy	1	4,600	12.54	16,196	8,807	7,389
73, W A D Ramanayake Mawatha, Colombo 2	1	37,528	45.00	245,968	146,519	99,449
No. 454, Main Street, Negombo	1	19,087	29.00	170,325	48,786	121,539
No. 77, Colombo Road, Kurunegala	1	31,459	30.00	643,244	95,043	548,201
Bank				1,267,322	395,895	871,427
Pattiwila Road, Sapugaskanda, Makola	4	23,077	7196.8	398,048	235,085	162,963
Group				1,665,370	630,980	1,034,390

* 1 perch = 25.2929 m2; 1 sq ft = 0.0929 m2

39.1.2 Market Value of Properties

	LKR Mn	Date of valuation
No. 73/5, Galle Road, Colombo 3	2437	30.09.2025
No. 5, Deva Veediya, Kandy	168	30.09.2025
No. 73, W A D Ramanayake Mawatha, Colombo 2	1114	30.09.2025

	LKR Mn	Date of valuation
No. 454, Main Street, Negombo	396	30.09.2025
No. 77, Colombo Road, Kurunegala	802	30.09.2025

Valued by Mr A A M Fathihu – Former Government Chief Valuer and Mr P Sangeethan, Associate Member of the Royal Institution of Chartered Surveyors.

39.1.3 Fully Depreciated Property, Plant and Equipment – Bank

The initial cost of fully depreciated property, plant & equipment, which are still in use as at the reporting date is as follows:

As at 31 December	2025 LKR ’000	2024 LKR ’000
Buildings	270,741	238,484
Office equipment	2,645,932	2,453,604
Furniture and fittings	737,928	690,810
Motor vehicles	222,124	233,159
	3,876,725	3,616,057

39.2 Reconciliation of Carrying Amount – GROUP

	Land and building LKR ’000	Improvements to leasehold lands LKR ’000	Right-of- use asset LKR ’000	Office equipment LKR ’000	Furniture and fittings LKR ’000	Motor vehicles LKR ’000	Work-in- progress LKR ’000	Total 31 December 2025 LKR ’000	Total 31 December 2024 LKR ’000
Cost at 1 January	1,672,375	15,613	2,668,536	4,367,640	1,850,818	254,676	50	10,829,708	9,596,831
Acquisitions	143,774	6,955	389,578	1,025,404	157,947	41,886	43,448	1,808,992	1,300,420
Transfers	11,549	–	–	–	–	–	–	11,549	–
Less: Disposals	162,328	–	20,128	2,646	36,533	11,036	–	232,671	67,543
Cost at 31 December	1,665,370	22,568	3,037,986	5,390,398	1,972,232	285,526	43,498	12,417,578	10,829,708
Accumulated depreciation at 1 January	630,723	5,223	1,508,213	3,149,389	1,199,266	256,188	–	6,749,002	5,892,420
Depreciation for the year	45,731	4,014	324,860	489,815	117,988	2,095	–	984,504	860,613
Less: Accumulated depreciation on disposals	45,474	–	–	2,646	34,131	11,036	–	93,287	4,031
Accumulated depreciation at 31 December	630,980	9,237	1,833,073	3,636,558	1,283,124	247,247	–	7,640,219	6,749,002
Carrying amount at 31 December	1,034,390	13,331	1,204,913	1,753,840	689,108	38,279	43,498	4,777,359	4,080,706

39.3 Title Restriction on Property, Plant and Equipment

There are no restrictions that existed on the title of property, plant and equipment of the Bank/Group as at the reporting date.

39.4 Acquisition of Property, Plant and Equipment during the Year

During the financial year, the Bank and Group acquired property, plant and equipment to the aggregate value of LKR 1,606 Mn and LKR 1,809 Mn respectively (2024 – LKR 1,268 Mn and LKR 1,300 Mn respectively).

39.5 Disposal of Property, Plant and Equipment during the Year

During the financial year, the Bank and Group disposed of property, plant and equipment to the aggregate value of LKR 63 Mn and LKR 233 Mn respectively (2024 – LKR 64 Mn and LKR 68 Mn respectively). Gain/(loss) on disposal of Property, Plant and Equipment is disclosed in Note 15 to the Financial Statements.

39.6 Capitalisation of Borrowing Costs

There were no capitalised borrowing costs relating to the acquisition of property, plant and equipment during the year (2024 – Nil).

39.7 Amount of Contractual Commitments for the Acquisition of Property, Plant and Equipment

The contractual commitments for the acquisition of property, plant and equipment as at the reporting date is LKR 841 Mn.

39.8 Impairment of Property, Plant and Equipment

Impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use (VIU). The fair value less costs to sell calculation is based on available data from an active market, in an arm’s length transaction, of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash-generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

The management has assessed the potential impairment loss of property, plant and equipment as at 31 December 2025. Based on the assessment, no impairment provision is required to be made in the financial statements as at the reporting date in respect of property, plant and equipment.

39.9 Property, Plant and Equipment pledged as Security

None of the property, plant or equipment have been pledged as security as at the reporting date.

39.10 Permanent Fall in Value of Property, Plant and Equipment

There has been no permanent fall in value of property, plant and equipment which require an impairment provision in the financial statements.

39.11 Temporarily idle Property, Plant and Equipment

There are no temporarily idle property, plant or equipment as at the reporting date.

39.12 Compensation from Third Parties for items of Property, Plant and Equipment

There was no compensation received/receivable from third parties for items of property, plant or equipment that were impaired, lost or given up.

Accounting Policy

Recognition and Measurement

Goodwill

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.

Other Intangible Assets

Other intangible assets, including customer relationships, patents and trademarks, that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.

Subsequent Expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

Amortisation

Amortisation is calculated to write-off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss. Goodwill is not amortised.

The estimated useful lives for current and comparative periods are as follows:

Computer software – 3-15 years

Amortisation methods, useful lives, and residual values are reviewed at each reporting date and adjusted if appropriate.

Derecognition

An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use and subsequent disposal.

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Computer Software	40.1	2,608,324	2,001,636	2,629,334	2,013,975
Goodwill on consolidation	40.2	–	–	156,226	156,226
Total		2,608,324	2,001,636	2,785,560	2,170,201

40.1 Computer Software

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Cost at 1 January	4,928,506	4,468,632	4,986,502	4,526,628
Acquisitions	1,136,976	459,874	1,152,637	459,874
Disposals	(20,085)	–	(20,085)	–
Cost at 31 December	6,045,397	4,928,506	6,119,054	4,986,502
Accumulated amortisation at beginning	2,926,870	2,542,345	2,972,527	2,581,598
Amortisation for the year	517,166	384,525	524,156	390,929
Less: Write-off	(6,963)	–	(6,963)	–
Accumulated amortisation at 31 December	3,437,073	2,926,870	3,489,720	2,972,527
Carrying amount at 31 December	2,608,324	2,001,636	2,629,334	2,013,975

40.2 Goodwill on Consolidation

	GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
DFCC Vardhana Bank PLC	146,603	146,603
Lanka Industrial Estates Limited	9,623	9,623
	156,226	156,226

In accordance with the provisions of Part VIII of the Companies Act, DFCC Vardhana Bank PLC (DVB) has been amalgamated with DFCC Bank PLC with effect from 01 October 2015. The amalgamation between two entities is considered as a common control transaction, as DFCC Bank continues to control the operations of DVB after amalgamation. Thus the results of amalgamation of two entities are economically the same before and after the amalgamation as the entity will have identical net assets. Therefore DFCC will continue to record carrying values including the remaining goodwill that resulted from the original acquisition of DVB in the consolidated financial status.

There were no impairment losses recognised in goodwill as at 31 December 2025.

40.3 Assessment of Impairment of Intangible Assets

The Board of Directors has assessed the potential impairment loss of intangible assets as at 31 December 2025. Based on the assessment, No impairment provision is recognised in the Financial Statements as at the reporting date.

40.4 Title Restriction on Intangible Assets

There are no restrictions that existed on the title of the intangible assets of the Group as at the reporting date.

40.5 Intangible Assets pledged as Security

None of the intangible assets have been pledged as security as at the reporting date.

40.6 Acquisition of Intangible Assets during the Year

During the financial year, the Bank and the Group acquired intangible assets to the aggregate value of LKR 1,137 Mn and LKR 1,153 Mn respectively (2024 – LKR 460 Mn and LKR 460 Mn respectively).

40.7 Amount of Contractual Commitments for the Acquisition of Intangible Assets

There are no contractual commitments for the acquisition of intangible assets as at the reporting date.

See accounting policy in Note 21.

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Deferred tax liabilities/assets
Deferred tax liabilities	41.1	–	–	(54,628)	(96,804)
Deferred tax assets	41.2	5,731,675	4,893,483	5,745,154	4,913,002
Net deferred tax liabilities/assets		5,731,675	4,893,483	5,690,526	4,816,198

41.1 Deferred Tax Liabilities

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	2,418,503	2,559,481	2,470,512	2,674,764
Recognised in income statement	63,244	(121,810)	80,609	(127,055)
Recognised in other comprehensive income	(408,561)	(19,168)	(408,561)	(19,168)
	2,073,186	2,418,503	2,142,560	2,528,541
Transferred from deferred tax assets	(2,073,186)	(2,418,503)	(2,087,932)	(2,431,737)
	–	–	54,628	96,804

*The deferred tax impact relating to the discontinued operation has been removed from the group opening balance brought forward.

41.2 Deferred Tax Assets

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	7,311,986	7,967,107	7,344,739	7,985,914
Recognised in income statement	634,326	(590,153)	628,153	(577,985)
Recognised in other comprehensive income	(141,451)	(64,968)	(139,806)	(63,190)
	7,804,861	7,311,986	7,833,086	7,344,739
Offset against deferred tax liabilities	(2,073,186)	(2,418,503)	(2,087,932)	(2,431,737)
	5,731,675	4,893,483	5,745,154	4,913,002

41.3 Recognised Deferred Tax Assets and Liabilities

		BANK				Group
As at 31 December		2025		2024		2025		2024
As at 31 December	Note	Temporary difference LKR ’000	Tax effect LKR ’000	Temporary difference LKR ’000	Tax effect LKR ’000	Temporary difference LKR ’000	Tax effect LKR ’000	Temporary difference LKR ’000	Tax effect LKR ’000
Assets
Property, equipment and software		–	–	–	–	2,268	680	6,853	2,056
Gratuity liability and actuarial losses on defined benefit plans		1,124,723	337,417	1,351,510	405,453	1,163,108	348,932	1,393,247	417,974
Lease liability		1,362,381	407,705	1,351,757	405,527	1,362,381	407,705	1,365,177	409,553
Unfunded pension liability		57,462	17,239	57,720	17,316	57,462	17,239	57,720	17,316
Expected credit loss – loans to and receivable from banks and other customers		22,131,417	6,640,434	19,603,520	5,881,056	22,143,656	6,644,105	19,612,670	5,883,801
Unutilised tax losses*	41.3.1	–	–	–	–	34,402	8,671	–	–
Other Provisions		1,340,221	402,066	2,008,780	602,634	1,352,512	405,754	2,046,797	614,039
		26,016,204	7,804,861	24,373,287	7,311,986	26,115,789	7,833,086	24,482,464	7,344,739
Liabilities
Property, equipment and software		1,102,897	330,869	935,687	280,706	1,329,338	398,801	1,092,147	327,644
Right-of-Use asset		1,204,913	361,474	1,148,230	344,469	1,204,913	361,474	1,160,330	348,099
Fair value through other comprehensive income financial assets		3,510,748	1,053,224	4,317,723	1,295,317	3,510,748	1,053,224	4,317,723	1,295,317
Equity investments at FVOCI – unquoted shares		324,760	97,428	262,890	78,867	324,760	97,428	262,890	78,867
Funded pension liability and actuarial gains on defined benefit plans		348,010	104,403	447,990	134,397	348,010	104,403	447,990	134,397
Cross currency SWAP		419,292	125,788	949,157	284,747	419,292	125,788	949,157	284,747
Undistributed profits of the Group		–	–	–	–	9,611	1,442	396,467	59,470
		6,910,620	2,073,186	8,061,677	2,418,503	7,146,672	2,142,560	8,626,704	2,528,541

*The group has recognised LKR 8.7 Mn (2024/25 – LKR NIL) as a deferred tax assets on the deductible temporary differences arising from tax losses. According to the group policy, deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which can be used.

41.3.1 TAX LOSSES MOVEMENT

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	–	–	3,129	2,079
Tax losses arising during the year	–	–	34,402	1,050
Tax losses utilised	–	–	(3,129)	–
Balance at 31 December	–	–	34,402	3,129

See accounting policy in Note 5.3.

		BANK		GROUP
As at 31 December		2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Financial assets
Refundable deposits		20,329	17,881	20,329	17,881
Receivable from Government of Sri Lanka	42.1	121,206	133,669	121,206	133,669
Other receivables		2,476,390	967,965	2,651,583	1,156,858
Items in transit*		3,580,675	3,826,707	3,580,675	3,826,707
Due from subsidiaries	42.2	–	306	–	–
		6,198,600	4,946,528	6,373,793	5,135,115
Non-financial assets
Advances and prepayments	48.1.2	1,902,544	2,426,614	1,957,022	2,477,834
Defined benefit asset	48.1.2	348,010	447,990	348,010	447,990
		2,250,554	2,874,604	2,305,032	2,925,824
		8,449,154	7,821,132	8,678,825	8,060,939

*Items in transit include clearing transactions, amount receivables under common electronic fund transfer CEFT system etc.

42.1 Receivable from Government of Sri Lanka

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Reimbursement of additional interest paid on Special Deposit Accounts (SDA)	87,091	115,102	87,091	115,102
Interest differential on special senior citizen term deposits	15,359	–	15,359	–
Interest subsidy on credit lines	18,756	18,567	18,756	18,567
	121,206	133,669	121,206	133,669

42.1.1 Movement in Impairment During the Year

		BANK/GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000
Balance at 1 January		–	2,580,642
Transferred from financial assets at amortised cost	33.4	–	2,109,075
Exchange rate impact		–	(456,365)
Charge to income statement	16.1	–	518,264
Disposal		–	(4,751,616)
Balance at 31 December		–	–

42.2 Due from Subsidiaries

	Bank
As at 31 December	2025 LKR ’000	2024 LKR ’000
DFCC Consulting (Pvt) Limited	–	306

Accounting Policy

Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use.

Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property or biological assets, which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale or held-for-distribution and subsequent gains and losses on remeasurement are recognised in profit or loss.

Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted.

The investment in joint venture was presented as assets held for sale in the Financial Statements as at 31 December 2024 based on the SLFRS 5 – “Non-current Asset Held for Sale and Discontinued operations”. The Bank sold this investment for a consideration of Rupees Six Billion Five Hundred Million (LKR 6.5 Bn) on 21 January 2025.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Investment in joint venture (Reclassified)	–	755,000	–	5,480,475
Asset held for sale	–	755,000	–	5,480,475

See accounting policy in Note 9.4.5.

These represent call money borrowings, credit balances in Nostro accounts and borrowings from banks. Subsequent to initial recognition, these are measured at amortised cost using the EIR method. Interest paid/payable on these borrowings is recognised in income statement.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Borrowing – foreign banks	347,621	17,699	347,621	17,699
– local banks	12,021,997	7,131,775	12,021,997	7,131,775
Interest payable – interest rate SWAP	2,693	–	2,693	–
	12,372,311	7,149,474	12,372,311	7,149,474

The maturity analysis of due to banks is given in Note 8.3.3 on pages 343 to 346.

See accounting policy in Note 5.3.2.2.1

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Total amount due to depositors	564,758,931	465,153,180	563,905,482	464,359,564

45.1 Analysis

45.1.1 By Product

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Demand deposits (current accounts)	20,890,936	17,376,417	20,891,257	17,376,641
Savings deposits	115,814,871	97,489,923	115,717,403	97,376,953
Term deposits	426,472,239	349,918,782	425,715,937	349,237,912
Certificates of deposit	–	27,029	–	27,029
Margin deposits	1,580,885	341,029	1,580,885	341,029
	564,758,931	465,153,180	563,905,482	464,359,564

DEPOSIT PORTFOLIO

45.1.2 By Currency

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Sri Lankan Rupee (LKR)	425,495,517	359,520,560	424,789,455	358,911,945
United States Dollar (USD)	123,115,332	95,028,553	122,967,945	94,843,552
Great Britain Pound (GBP)	9,152,593	4,738,303	9,152,593	4,738,303
Australian Dollar (AUD)	3,844,825	3,000,033	3,844,825	3,000,033
Euro (EUR)	2,590,324	2,125,358	2,590,324	2,125,358
Others	560,340	740,373	560,340	740,373
	564,758,931	465,153,180	563,905,482	464,359,564

45.1.3 By Institution/Customers

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Deposits from banks	8,382,979	10,310,005	8,382,979	10,310,005
Deposits from finance companies	2,597,531	3,795,360	2,597,531	3,795,360
Deposits from other customers	553,778,421	451,047,815	552,924,972	450,254,199
	564,758,931	465,153,180	563,905,482	464,359,564

The maturity analysis of deposits from customers is given in Note 8.3.3 on pages 343 to 349.

See accounting policy in Note 9.4.7.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Repayable in foreign currency
Borrowing sourced from
Multilateral institutions	464,563	529,152	464,563	529,152
Bilateral institutions	29,255,856	32,967,878	29,255,856	32,967,878
	29,720,419	33,497,030	29,720,419	33,497,030
Repayable in rupees
Borrowing sourced from
Multilateral institutions	11,425,854	12,429,063	11,425,854	12,429,063
Bilateral institutions	2,824,978	1,771,392	2,854,178	1,771,392
Central Bank of Sri Lanka – refinance loans (secured)	85,275	158,180	85,275	158,180
Securities sold under repurchase (Repo) agreements	90,298,231	48,899,967	90,278,191	48,899,967
	104,634,338	63,258,602	104,643,498	63,258,602
	134,354,757	96,755,632	134,363,917	96,755,632

46.1 Assets Pledged as Security

As at 31 December	2025 LKR ’000	2024 LKR ’000
Assignment in terms of Section 88 A of the Monetary Law of Loans refinanced by Central Bank	85,275	158,180

See accounting policy in Note 9.4.8.

47.1 Debt Securities at Amortised Cost Issued by Bank

						BANK/GROUP
	Face value LKR ’000	Interest rate %	Repayment terms	Issue date	Maturity date	31 December 2025 LKR ’000	31 December 2024 LKR ’000
Debenture issue – Listed (LKR)	1,784,070	13.75	7 years	28 March 2019	28 March 2026	1,969,000	1,967,841
	4,411,170	13.90	10 years	28 March 2019	28 March 2029	4,866,115	4,864,732
	2,500,000	12.00	3 years	24 September 2024	24 September 2027	2,576,336	2,559,906
	131,600	9.75	3 years	21 November 2025	21 November 2028	132,760	–
	20,846	9.75*	3 years	21 November 2025	21 November 2028	21,034	–
	842,051	10.25	4 years	21 November 2025	21 November 2029	849,183	–
	182,723	10.25*	4 years	21 November 2025	21 November 2029	184,056	–
	1,592,040	10.50	5 years	21 November 2025	21 November 2030	1,604,846	–
	83,022	10.50*	5 years	21 November 2025	21 November 2030	83,529	–
Unlisted (LKR)	5,000,000	11.00	5 years	12 June 2020	12 June 2025	–	5,298,244
	16,547,522					12,286,859	14,690,723

*Annual Compounding on the Issue Price Payable on the Date of Redemption

47.2 Carrying values are the discounted amounts of principal and interest.

47.3 There were no debt securities in issue designated as FVTPL.

47.4 The Bank/Group did not have any defaults of principal or interest or other breaches with respect to its debt securities during the year ended 31 December 2025.

47.5 Debt securities issue – Listed debentures

Debenture category	Interest payable frequency	Applicable interest rate %	Interest rate of comparative government securities (Gross) p.a. %	Balance as at 31 December 2025 LKR ’000	Market price			Yield last traded %
Debenture category	Interest payable frequency	Applicable interest rate %		Balance as at 31 December 2025 LKR ’000	Highest	Lowest	Lowest	Yield last traded %
Fixed rate
2019/2026	Annually	13.75	7.90%	1,969,000	N/T	N/T	N/T	N/A
2019/2029	Annually	13.90	9.32%	4,866,115	N/T	N/T	N/T	N/A
2024/2027	Annually	12.00	8.75%	2,576,336	N/T	N/T	N/T	N/A
2025/2028	Annually	9.75	9.13%	132,760	N/T	N/T	N/T	N/A
2025/2028	Zero Coupon Bond	*9.75	9.13%	21,034	N/T	N/T	N/T	N/A
2025/2029	Annually	10.25	9.59%	849,183	N/T	N/T	N/T	N/A
2025/2029	Zero Coupon Bond	*10.25	9.59%	184,056	N/T	N/T	N/T	N/A
2025/2030	Annually	10.50	9.67%	1,604,846	N/T	N/T	N/T	N/A
2025/2030	Zero Coupon Bond	*10.50	9.67%	83,529	N/T	N/T	N/T	N/A
				12,286,859

N/T – Not traded

N/A – Not applicable

* Annual compounding on the issue price payable on the date of redemption.

47.6 Debt Securities at Amortised Cost – by Maturity

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Payable within one year	1,969,000	5,298,243
Payable after one year	10,317,859	9,392,480

As at 31 December	2025 LKR ’000	2024 LKR ’000
Other ratios
Debt to equity ratio (times)	2.00	2.01
Interest cover (times)	2.72	2.78
Liquid asset ratio (%)	184.06	280.26

47.7 DISCLOSURES REGARDING THE UTILISATION OF FUNDS AS PER THE OBJECTIVES STATED IN THE GREEN BOND ISSUE PROSPECTUS

Objective as per Prospectus

Amount
allocated
as per
prospectus

Proposed
date of
allocation
as per
prospectus

Amount
allocated
from
Proceeds
(A)

Percentage of
total
proceeds

Amount
utilised
as at
31.12.2025
(B)

Percentage of
utilisation
against
allocation
(B/A)

Clarification if not fully utilised including where the funds are invested (e.g. Whether lent to related party/ies, etc.)

Financing the establishment, acquisition, expansion, and/or ongoing management of onshore ground and rooftop mounted solar photovoltaic (PV) power generation facilities	LKR 2,500 Mn (Maximum issuance)	Within 18 months upon allotment of the bonds	LKR 2,500 Mn	100%	LKR 2,470 Mn	98.8%	Invested in government securities
Refinancing existing onshore ground and rooftop mounted solar photovoltaic (PV) power generation facilities provided such projects were approved for financing by the Bank and were commissioned within a two (2) year “lookback” period from the date the project was earmarked for funding by the proceeds of the particular Green Bond.	LKR 2,500 Mn (Maximum issuance)	Immediately, upon allotment of bonds	Nil	0%	Nil	0%	A loan granted for a project included a component that was disbursed prior to the bond issuance and subsequently refinanced upon bond allotment. In addition, amounts were financed after the bond issuance for the same project. The loan was fully settled in December 2025, and the settled exposure was replaced with new eligible projects to ensure that the bond proceeds were fully earmarked and allocated by year end.

* Date of allotment of Green Bonds – 24 September 2024

47.8 DISCLOSURES REGARDING THE UTILISATION OF FUNDS AS PER THE OBJECTIVES STATED IN THE BLUE BOND ISSUE PROSPECTUS

Objective as per Prospectus	Amount allocated as per prospectus	Proposed date of allocation as per prospectus	Amount allocated from proceeds (A)	Percentage of total proceeds	Amount utilised as at 31.12.2025 (B)	Percentage of utilisation against allocation (B/A)	Clarification if not fully utilised including where the funds are invested (e.g. Whether lent to related party/ies etc.)
Promoting a sustainable blue economy	LKR 3,000 Mn	Over a period of 18 months from the date of allotment	LKR 3,000 Mn	100%	_	0%	Invested in government securities

* Date of allotment of Blue Bonds – 21 November 2025

Accounting policy

A. Defined Contribution Plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided and recognised as personnel expenses in profit or loss. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

This provides for a lump sum payment on termination of employment by resignation, retirement at the age of 57-60 years or death while in service. Lump sum payment is by an outside agency to which contributions are made.

All employees of the Bank are members of the Mercantile Service Provident Society and the Employees’ Trust Fund Board to which the Bank contributes 15% and 3% respectively of such employee’s consolidated salary.

Other subsidiary companies of the Group contribute to the Employees’ Provident Fund and Employees’ Trust Fund in the range of 12% – 15% and 3% respectively.

Contributions to defined contribution plans are recognised as an expense in the income statement as incurred.

B. Defined Benefit Plans (DBPs)

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan as defined in the Sri Lanka Accounting Standard – LKAS 19 on “Employee Benefits”.

Pension Liability Arising from Defined Benefit ObligationsDescription of the Plan and Employee Groups Covered

The Bank established a trust fund in May 1989, for payment of pension which operates the pension scheme approved by the Commissioner General of Inland Revenue. The fund of the scheme is managed by trustees appointed by the Bank and is separate from the Bank. The scheme provides for payment of pension to retirees, spouse, and minor children of deceased retirees based on pre-retirement salary. All members of the permanent staff who joined prior to 1 May 2004 are covered by this funded pension scheme subject to fulfilment of eligibility conditions prescribed by the Bank.

The scheme was amended on 31 August 1998 and the amended plan will apply to all members of the permanent staff who joined the Bank on or after this date and prior to 1 May 2004. The amendment reduced the scope of the benefit in the interest of long-term sustainability of the pension plan as advised by the independent actuary. The defined benefit pension plan does not permit any post-retirement increases in pension nor any other benefit (e.g. medical expenses reimbursement).

Funding Arrangement

The Bank’s contributions to the Trust Fund are made annually based on the recommendation of an independent actuary. The employees make no contributions to qualify for the basic pension, which is therefore a non-contributory benefit to the employees.

Eligible employees who desire to provide for the payment of pension to spouse and minor children, who survive them are however, required to contribute monthly, an amount based on a percentage of gross emoluments, excluding bonus, if they joined the Bank on or after 31 August 1998 and prior to 1 May 2004.

Recognition of Actuarial Gains and Losses

The net actuarial gains or losses arising in a financial year is due to increases or decreases in either the present value of the promised pension benefit obligation or the fair value of pension assets. The causes for such gains or losses include changes in the discount rate, differences between the actual return, and the expected return on pension assets and changes in the estimates of actual employee turnover, mortality rates, and increases in salary.

The Group recognises the total actuarial gains and losses that arise in calculating the Group’s obligation in respect of the plan in other comprehensive income and the expense under personnel expenses in the income statement during the period in which it occurs.

Recognition of Past Service Cost

Past service cost arises when a defined benefit plan is introduced for the first time or subsequent changes are made to the benefits payable under an existing defined benefit plan. Group will recognise past service cost as an expense on a straight-line basis over the average period until the benefits become vested. To the extent the benefits are already vested following the introduction of or changes to a defined benefit plan, the Group will recognise past service cost immediately.

Provision for end of Service Gratuity Liability under a Defined Benefit Plan

Description of the Plan and Employee Groups Covered

The Group provides for the gratuity payable under the Payment of Gratuity Act No. 12 of 1983 as amended for all employees who do not qualify under the pension scheme. Therefore, this applies to employees recruited to the permanent cadre on or after 1 May 2004 on tenured or fixed term contract employment in the Bank. The subsidiary companies, which do not have a non-contributory pension scheme provide for the gratuity payable under the Payment of Gratuity Act No. 12 of 1983 for all employees. The promised benefit is half a month pre-termination salary for each completed year of service, provided a minimum qualifying period of five years is served prior to termination of employment.

The Group however, recognises the liability by way of a provision for all employees in tenured employment from the date they joined the permanent cadre, while fixed term employees liability is recognised only if the fixed term contract of service provides for unbroken service of five years or more either singly or together with consecutive contracts.

Funding Arrangement

The Bank and the subsidiaries adopt a pay-as-you-go method whereby the employer makes a lump-sum payment only on termination of employment by resignation, retirement at the age of 57-60 years or death while in service.

Recognition of Actuarial Gains and Losses

The Group recognises the total actuarial gains and losses in the other comprehensive income during the period in which it occurs.

Recognition of Past Service Cost

Since end of service gratuity defined benefit is a statutory benefit, the recognition of past service cost will arise only if the Payment of Gratuity Act No. 12 of 1983 is amended in future to increase the promised benefit on termination of employment. In such event, the Bank will adopt the accounting policy currently used for defined benefit pension plan.

When the benefit of a plan change or plan curtailed the resulting change in benefit that relate to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Bank recognises gain or loss on the settlement of a defined plan when settlement occurs.

48.1 Composition

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Unfunded defined benefit plans	48.1.1	1,182,185	1,409,232	1,220,570	1,450,966
		1,182,185	1,409,232	1,220,570	1,450,966

48.1.1 Unfunded Defined Benefit Plans

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Defined benefit
– unfunded pension	48.1.1.1	57,462	57,720	57,462	57,720
– unfunded end of service gratuity	48.1.1.2	1,124,723	1,351,512	1,163,108	1,393,246
		1,182,185	1,409,232	1,220,570	1,450,966

48.1.1.1 Unfunded Pension Liabilities

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	57,720	53,214
Interest on obligation	5,393	5,684
Benefits paid	(6,996)	(6,996)
Actuarial experience loss	1,345	1,113
Loss due to changes in assumptions	–	4,705
Present value of defined benefit pension obligations	57,462	57,720

This relates to pension liability of an ex-employee, not funded through the DFCC Bank PLC Pension Fund. The liability covers the pension benefit to retiree and survivor.

48.1.1.2 Unfunded end of Service Gratuity

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	1,351,512	1,317,912	1,393,249	1,347,707
Current service cost	195,564	191,244	199,890	201,476
Interest on obligation	135,151	151,560	138,492	161,786
Benefits paid	(84,653)	(86,823)	(95,563)	(88,381)
Actuarial experience gain	(36,910)	40,939	(37,019)	36,785
Gain due to changes in assumptions	(435,941)	(263,320)	(435,941)	(263,320)
Transfers during the year	–	–	–	(2,807)
Present value of defined benefit pension obligations	1,124,723	1,351,512	1,163,108	1,393,246

48.1.2 Funded Pension Liabilities/(assets)

		BANK/GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000
Fair value of pension assets	48.1.2.2.2	3,358,370	3,464,196
Present value of defined benefit pension obligations	48.1.2.1	(3,010,360)	(3,016,206 )
Defined benefit assets	42	348,010	447,990

As per LKAS 19 on “Employee Benefits” if a plan is in surplus, then the amount recognised as an asset in the statement of financial position is limited to the “asset ceiling”. The asset ceiling is the present value of any economic benefits available to the entity in the form of a refund or a reduction in future contributions. By analysing all the future economic benefits available to the DFCC Pension Fund, the independent actuary Mr Piyal S Goonetilleke of Piyal S Goonetilleke & Associates, has estimated the asset ceiling as at 31 December 2025 to be LKR 348 Mn in his report dated 15 January 2026.

48.1.2.1 Movement in Defined Pension Obligation

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Present value of defined benefit pension obligations at the beginning	3,016,206	2,670,723
Current service cost	45,594	44,562
Interest on obligation	301,621	307,133
Benefits paid	(288,147)	(247,808)
Actuarial experience loss	56,133	51,939
Loss/(Gain) due to changes in assumptions	(121,047)	189,657
Present value of defined benefit pension obligations	3,010,360	3,016,206

48.1.2.2 Movement in Pension Assets

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Pension assets at 1 January	3,497,427	3,394,973
Expected return on pension assets	334,134	374,983
Benefits paid	(288,147)	(247,808)
Actuarial experience loss	(29,272)	(24,721)
Pension assets at 31 December	3,514,142	3,497,427

48.1.2.2.1 Assets ceiling adjustment

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Current year adjustment	(155,772)	(33,231)
Reversal of previous year adjustment	33,231	281,000
Net asset ceiling adjustment for the year	(122,541)	247,769

48.1.2.2.2 Pension asset adjusted for the asset ceiling

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Pension assets	3,514,142	3,497,427
Current year assets ceiling adjustment	(155,772)	(33,231)
Pension asset adjusted for the asset ceiling	3,358,370	3,464,196

48.1.2.3 Plan Assets Consist of the following

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Treasury Bonds	938,029	936,579
Treasury Bills	–	265,988
Balances with banks	17,023	22,004
Fixed deposits	2,460,000	2,129,500
Others	99,090	143,356
	3,514,142	3,497,427

48.1.2.4 The Expected Benefit Pay Out in the Future Years to the Defined Benefit Obligation – Bank

	Unfunded pension liability*	Unfunded end of service gratuity*	Funded pension liability*
	31 December 2025 LKR ’000	31 December 2025 LKR ’000	31 December 2025 LKR ’000
Within next 12 months	6,996	88,756	250,716
Between 2 to 5 years	27,982	485,909	1,166,463
Beyond 5 years	34,977	1,024,233	1,790,103

* Based on expected benefits pay out in next 10 years

48.2 Actuarial Valuation

Actuarial valuation was carried out by Mr Piyal S Goonetilleke, Fellow of the Society of Actuaries USA, of Piyal S Goonetilleke & Associates, on 31 December 2025.

48.2.1 Actuarial Valuation Method

Projected unit credit method was used to allocate the actuarial present value of the projected benefits earned by employees to date of valuation.

48.2.2 Principal Actuarial Assumptions – Bank

	31 December 2025		31 December 2024
	Pension benefit (%)	End of service gratuity (%)	Pension benefit (%)	End of service gratuity (%)
Discount rate per annum
Pre–retirement	10.0	10.0	10.0	10.0
Post–retirement	10.0	Not applicable	10.0	Not applicable
Future salary increases per annum	9	9	12	12
Expected rate of return on pension assets	10.0	–	10.0	–
Actual rate of return on pension assets	9.02	–	10.1	–
Mortality	UP 1984 mortality table	RP-2000 mortality table	UP 1984 mortality table	RP-2000 mortality table
Retirement age	57-60 years	57-60 years	57-60 years	57-60 years
Normal form of payment:	Lump sum commuted pension payment followed by reduced pension for 10 years (25% reduction) (for new entrants recovery period is 15 years)	Lump sum	Lump sum commuted pension payment followed by reduced pension for 10 years (25% reduction) (for new entrants recovery period is 15 years)	Lump sum
Turnover rate –
Age
20	10.0	10.0	10.0	10.0
25	10.0	10.0	10.0	10.0
30	10.0	10.0	10.0	10.0
35	7.5	7.5	7.5	7.5
40	5.0	5.0	5.0	5.0
45	2.5	2.5	2.5	2.5
50/55	1.0	1.0	1.0	1.0

The principal actuarial assumptions in the current year has changed from previous year as presented in the Note 48.2.2. The discount rate is the yield rate on 31 December 2025 with a term equalling the estimated period for which all benefit payments will continue. This period is approximately 16.33 years for pension and 12.5 years for end of service gratuity. The differences in the discount rates for pension and end of service gratuity reflect the differences in the estimated period for benefit payments will continue.

Principal Actuarial Assumptions – Group

The subsidiaries have used discount rates of 10% and the salary increment rate ranging 3% – 16%.

48.2.3 Sensitivity of Assumptions Used in the Actuarial Valuation

The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions used with all other variables held constant in the employment benefit liability measurement. The effect in the income statement and the statement of financial position with the assumed changes in the discount rates and salary increment rate is given below:

	Effect on other comprehensive income statement	Effect on defined benefit obligation
	Increase/(Decrease) LKR ’000	Increase/(Decrease) LKR ’000
Funded pension liability
Discount rate
1%	215,955	(215,955)
–1%	(248,158)	248,158
Salary increment rate
1%	(38,294)	38,294
–1%	36,380	(36,380)
Unfunded pension liability*
Discount rate
1%	3,107	(3,107)
–1%	(3,444)	3,444
Unfunded end of service gratuity
Discount rate
1%	105,439	(105,439)
–1%	(124,123)	124,123
Salary increment rate
1%	(124,123)	124,123
–1%	107,238	(107,238)

*Salary increment not applicable for ex–employees

48.3 Historical Information

As at 31 December	2025 LKR ’000	2024 LKR ’000	2023 LKR ’000	2022 LKR ’000	2021 LKR ’000
Fair value of plan assets	3,358,370	3,464,196	3,113,973	1,954,163	2,808,394
Present value of the deﬁned beneﬁt obligation	(3,010,360)	(3,016,206)	(2,670,723)	(1,699,403)	(2,692,271)
Surplus in the plan	348,010	447,990	443,250	254,760	116,123

Accounting policy in Note 21.

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January		3,066,586	4,426,683	3,160,100	4,535,557
Provision for the year on continuing operation	21.1	5,484,441	4,677,547	5,659,894	4,814,168
Provision for the year on discontinued operation	22	726,257	–	726,257	–
Reversal of over provision	21.1	(392,008)	–	(389,597)	–
Self-assessment payments		(6,207,611)	(6,034,647)	(6,323,418)	(6,173,051)
Withholding tax		(8,553)	(2,997)	(76,668)	(18,584)
Balance at 31 December		2,669,112	3,066,586	2,756,568	3,158,090
Current tax liabilities		2,669,112	3,066,586	2,757,706	3,160,100
Current tax assets		–	–	(1,138)	(2,010)

Provisions are recognised when it is probable that an outflow of economic benefit will be required to settle a current legal or constructive obligation which has arisen as a result of past events, and for which a reliable estimate can be made of the amount of the obligation.

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Financial liabilities
Prior year's dividends		31,432	18,891	31,432	18,891
Security deposit for leases		–	–	254,599	222,280
Lease liabilities	52.4	1,362,382	1,347,869	1,362,382	1,361,286
Account payables		6,898,718	6,071,849	6,960,683	6,117,525
Due to subsidiaries	50.2	5,825	2,711	–	–	–
		8,298,357	7,441,320	8,609,096	7,719,982
Non-financial liabilities
Accrued Expenses		1,668,327	1,253,415	1,764,975	1,322,692
Prepaid loan and lease rentals		29,368	580,851	82,372	628,807
Impairment for expected credit loss – credit related contingent liabilities and commitments	58.1.1	1,300,422	1,507,968	1,300,422	1,507,968
Other provisions	50.1	1,248,765	2,008,779	1,261,918	2,051,756
		4,246,882	5,351,013	4,409,687	5,511,223

		BANK		GROUP
As at 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
		12,545,239	12,792,333	13,018,783	13,231,205

50.1 Other Provisions

Other provisions includes benefit payable to employees.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	2,008,779	732,524	2,051,756	751,074
Provisions for the financial year	1,399,000	2,008,779	1,409,758	2,053,027
Provisions used during the year	(1,505,714)	(967,714)	(1,543,626)	(987,535)
Provisions (reversal)/charge during the year	(653,300)	235,190	(655,970)	235,190
Balance at 31 December	1,248,765	2,008,779	1,261,918	2,051,756

50.2 Due to Subsidiaries

	BANK
As at 31 December	2025 LKR ’000	2024 LKR ’000
Synapsys Limited	5,825	2,711
	5,825	2,711

Accounting policy in Note 5.3

These represent the funds borrowed by the Bank/Group for long-term funding requirements. Subsequent to initial recognition, these are measured at their amortised cost using the EIR method, except where the Bank/Group designates them at fair value through profit or loss. Interest paid/payable is recognised in income statement.

						BANK/GROUP
	Face value LKR ’000	Interest rate %	Repayment terms	Issued date	Maturity date	31 December 2025 LKR ’000	31 December 2024 LKR ’000
Listed debentures
Issued by Bank	4,086,530	13.00	7 years	29-Mar-2018	28-Mar-2025	–	4,485,689
	4,318,000	9.00	5 years	23-Oct-2020	23-Oct-2025	–	4,386,825
	205,000	9.25	7 years	23-Oct-2020	23-Oct-2027	208,284	208,191
	7,945,230	15.25	5 years	16-Jan-2024	16-Jan-2029	9,092,571	9,090,767
	54,770	14.75	7 Years	16-Jan-2024	16-Jan-2031	62,444	62,582
	16,609,530					9,363,299	18,234,054

51.1 Subordinated Term Debt – Listed Debentures

Debenture category	Interest rate frequency	Applicable interest rate %	Interest rate of comparative Government securities (Gross) p.a. %	Balance as at 31 December 2025 LKR ’000	Market price			Interest yield last traded %	Yield to maturity last traded %	Last traded date
Debenture category	Interest rate frequency	Applicable interest rate %		Balance as at 31 December 2025 LKR ’000	Highest	Lowest	Last traded	Interest yield last traded %	Yield to maturity last traded %	Last traded date
Fixed rate
2020-2027	Annually	9.25	8.66	208,284	N/T	N/T	N/T	N/T	N/T	N/T
2024-2029	Annually	15.25	9.28	9,092,571	100	99.84	99.84	15.29	10.58	30 Jan 2025
2024-2031	Annually	14.75	9.93	62,444	N/T	N/T	N/T	N/T	N/T	N/T
				9,363,299

N/T – Not traded.

Debt equity ratio, interest cover and liquid asset ratio is given in Note 47.6.

51.2 Subordinated Liabilities by Maturity

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Payable within one year	–	8,872,514
Payable after one year	9,363,299	9,361,540
Total	9,363,299	18,234,054

In the event of the winding-up of the issuer, the above liabilities would be subordinated to the claims of depositors and all other creditors of the issuer. The Bank has not had any defaults of principal, interest or other breaches with respect to its subordinated liabilities during the year ended 31 December 2025.

The maturity analysis of subordinated liabilities is given in Note 8.3.3 on pages 343 to 346.

Accounting Policy

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in SLFRS 16.

As a Lessee

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made or payable at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from the Bank’s internal records (weighted average cost of funds) to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Short-term Leases and Leases of Low-value Assets

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

As a Lessor

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration inthe contract to each lease component on the basis of their relative stand-alone prices.

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. It assesses the lease classification of a sublease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sublease as an operating lease.

If an arrangement contains lease and non-lease components, then the Group applies SLFRS 15 to allocate the consideration in the contract.

The Group applies the derecognition and impairment requirements in SLFRS 9 to the net investment in the lease.

The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.

52.1 Leases as Lessee (SLFRS 16)

The Bank leases a number of branch and office premises. The leases typically run for a period of 2-10 years, with an option to renew the lease after that date. For some leases, payments are renegotiated to reflect market rentals. Some leases provide for additional rent payments that are based on changes in local price indices.

There were no identifiable assets that were sublet by the Bank to its subsidiary during the year.

Information about leases for which the Bank is a lessee is presented below.

52.2 Right–of–Use Assets

Right-of-use assets related to leased properties that do not meet the definition of investment property are presented as property, plant and equipment (see Note 39).

	BANK Branch and office premises		GROUP Branch and office premises
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	1,148,231	1,288,101	1,160,323	1,304,874
Additions	389,578	269,488	389,578	269,488
Depreciation charge for the year	(320,636)	(346,225)	(324,860)	(350,906)
Derecognition of right–of–use assets	(12,260)	(63,133)	(20,128)	(63,133)
Balance at 31 December	1,204,913	1,148,231	1,204,913	1,160,323

See Note 8.33 for maturity analysis of lease liabilities as at 31 December 2025.

52.3 Lease Liability

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	1,347,869	1,455,858	1,361,286	1,473,145
Interest charged during the year	129,648	144,282	127,827	146,803
Payment to lease creditors	(423,450)	(431,274)	(435,046)	(437,665)
Termination of operating lease agreements during the year	(16,781)	(97,646)	(16,781)	(97,646)
Additions/Renewals of operating lease agreements during the year	325,096	276,649	325,096	276,649
Balance at 31 December	1,362,382	1,347,869	1,362,382	1,361,286

52.4 The Future Minimum Lease Payments under Non–cancellable Operating Leases

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Maturity analysis – contractual undiscounted cash flows
Less than 1 year	443,362	395,002	443,362	401,393
Between 1 and 5 years	1,138,916	1,043,201	1,138,916	1,053,319
More than 5 years	389,550	371,093	389,550	371,093
Total undiscounted lease liabilities at 31 December	1,971,828	1,809,296	1,971,828	1,825,805
Total discounted lease liabilities at 31 December	1,362,382	1,347,869	1,362,382	1,361,286

52.5 Amounts Recognised in Income Statement

		BANK		GROUP
For the year ended 31 December	Note	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Leases under SLFRS 16
Interest expenses on lease liabilities	11.1.2	129,648	144,282	127,827	146,803
Depreciation charge for the year	39.1	320,636	346,225	324,860	350,906
		450,284	490,507	452,687	497,709

52.6 Extension options

Some property leases contain extension options exercisable by the Bank. Where practicable, the Bank seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Bank and not by the lessors. The Bank assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The Bank reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.

Accounting Policy

Shares are classified as equity when there is no contractual obligation to transfer cash or other financial assets.

	Number of ordinary voting shares		BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	432,658,011	421,948,655	14,710,454	13,866,557
Issue of ordinary shares as part of the final dividend satisfied in the form of issue and allotment of new shares	5,746,239	10,709,356	735,519	843,897
Balance at 31 December	438,404,250	432,658,011	15,445,973	14,710,454

Ordinary shares in the Bank are recognised at the amount paid per ordinary share. The shares of the Bank quoted on the Colombo Stock Exchange.

The holders of ordinary shares are entitled to receive dividends declared from time to time and are entitled to one vote per share at General Meetings of the Bank.

Reserve Fund

	BANK/Group
As at 31 December	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	3,657,968	3,239,968
Transfers	802,000	418,000
Balance at 31 December	4,459,968	3,657,968

Nature and purpose of reserve

Statutory reserve fund is maintained as per the statutory requirements in terms of Section 20 (1) and (2) of the Banking Act No. 30 of 1988.

This fund is built by transferring a sum equivalent to not less than 5% of the profit after tax before any dividend is declared or any profits are transferred until the fund equals 50% of the Bank’s stated capital. Thereafter, a further sum equal to 2% of profit after tax is transferred until the fund equals the stated capital of the Bank.

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Balance at 1 January	35,834,730	28,250,357	42,668,104	33,645,590
Profit for the year	16,028,237	8,352,531	11,368,784	9,777,516
Other comprehensive (expenses)/income net of tax	269,225	128,947	266,485	124,407
Transfers to statutory reserves	(802,000)	(418,000)	(802,000)	(418,000)
Transfers to other reserves	–	–	(60,547)	–
Dividends paid – scrip	(735,519)	(843,897)	(735,519)	(843,897)
Dividends paid – cash	(1,860,429)	(1,265,846)	(1,860,429)	(1,265,846)
Forfeiture of unclaimed dividends	4,901	6,579	4,901	6,579
Net gains on disposal of equity investments	1,552,085	1,624,059	1,311,152	1,624,059
Change in holding through joint venture	–	–	–	17,696
Balance at 31 December	50,291,230	35,834,730	52,160,931	42,668,104

This represents cumulative net earnings, inclusive of final dividend approved amounting to LKR 3,288 Mn.

The balance is retained and reinvested in the business of the Bank.

	BANK
As at 31 December 2025	Fair value reserve LKR ’000	Hedging reserve LKR ’000	General reserve LKR ’000	Total LKR ’000
Balance at 1 January	15,385,597	664,409	13,779,839	29,829,845
Movements/Transfers	7,763,684	(377,927)	–	7,385,757
Balance at 31 December	23,149,281	286,482	13,779,839	37,215,602

	BANK
As at 31 December 2024	Fair value reserve LKR ’000	Hedging reserve LKR ’000	General reserve LKR ’000	Total LKR ’000
Balance at 1 January	7,250,399	1,353,846	13,779,839	22,384,084
Movements/Transfers	8,135,198	(689,437)	–	7,445,761
Balance at 31 December	15,385,597	664,409	13,779,839	29,829,845

	GROUP
As at 31 December 2025	Fair value reserve LKR ’000	Exchange equalisation reserve LKR ’000	Hedging reserve LKR ’000	General reserve LKR ’000	Total LKR ’000
Balance at 1 January	13,954,598	294,630	334,526	13,779,839	28,363,593
Movements/Transfers	8,029,911	(294,630)	(48,044)	–	7,687,237
Balance at 31 December	21,984,509	–	286,482	13,779,839	36,050,830

	GROUP
As at 31 December 2024	Fair value reserve LKR ’000	Exchange equalisation reserve LKR ’000	Hedging reserve LKR ’000	General reserve LKR ’000	Total LKR ’000
Balance at 1 January	5,818,791	561,071	1,071,797	13,779,839	21,231,498
Movements/Transfers	8,135,807	(266,441)	(737,271)	–	7,132,095
Balance at 31 December	13,954,598	294,630	334,526	13,779,839	28,363,593

TRANSFER OF NET GAINS ON DISPOSAL OF EQUITY INVESTMENT AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME TO RETAINED EARNINGS

	BANK/Group
As at 31 December	2025 LKR ’000	2024 LKR ’000
Fair value of the investment at the date of derecognition	4,373,268	4,246,408
Cost of Investment	(2,821,183)	(2,622,349)
Cumulative net gains on disposal	1,552,085	1,624,059

56.1 Fair Value Reserve

The fair value reserve comprises the cumulative net change in fair value of financial assets measured at fair value through other comprehensive income until such investments are derecognised or impaired.

56.2 Hedging Reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash flow hedges pending subsequent recognition in income statement as the hedge cash flows affect profit or loss.

56.3 General Reserve

The Bank transfers the surplus retained earnings to the general reserve time to time. The purpose of setting up the general reserve is to meet potential future unknown liabilities.

Accounting Policy

Non-controlling interests (NCI) are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

The following table summarises the information relating to each of the Group’s subsidiaries that has material NCI, before any intra-group eliminations:

	Lanka Industrial Estates Limited
As at 31 December	2025 LKR ’000	2024 LKR ’000
Non-current assets	846,801	672,710
Current assets	880,012	740,694
Non-current liabilities	(261,910)	(207,788)
Current liabilities	(358,517)	(291,634)
Net assets*	1,106,386	913,982
Net assets attributable to NCI – 48.84%	540,403	446,431
Other adjustments	37,084	–
Total NCI	577,487	446,431

* See Note 36

For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
Revenue	710,661	652,521
Profit	331,232	317,101
Other comprehensive income	(1,880)	(6,374)
Total comprehensive income	329,352	310,727
Profit allocated to NCI – 48.84%	160,869	154,885
Other adjustments	1,851	–
Total profit attributable to NCI	162,720	154,885
Other comprehensive expense allocated to NCI	(918)	(3,113)
Cash flows from operating activities	133,322	402,724
Cash flows from investing activities	(188,819)	(29,343)
Cash flows from financing activities	(107,747)	(199,615)
Net increase in cash and cash equivalents	(163,243)	173,766

Accounting Policy

Commitments and Contingencies

Contingent liabilities, which include guarantees, are possible obligations that arise from past events whose existence will be confirmed only by the occurrence, or non-occurrence, of one or more uncertain future events not wholly within the control of the Bank; or are present obligations that have arisen from past events but are not recognised because it is not probable that settlement will require the outflow of economic benefits, or because the amount of the obligations cannot be reliably measured. Contingent liabilities are not recognised in the Financial Statements but are disclosed unless the probability of settlement is remote.

Even though these obligations may not be recognised on the Statement of Financial Position they do contain credit risk and are there for part of the overall risk of the Bank as disclosed in Note 58.1 below:

Financial Guarantees

Liabilities under financial guarantee contracts are recorded initially at their fair value, which is generally the fee received or receivable. Subsequently, financial guarantee liabilities are measured at the higher of the initial fair value, less cumulative amortisation, and the best estimate of the expenditure required to settle the obligations.

58.1 Contingent Liabilities and Commitments

	BANK		GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Guarantees issued to –
Banks in respect of indebtedness of customers of the Bank	134,734	986,667	134,734	986,667
Companies in respect of indebtedness of customers of the Bank	17,707,615	13,437,786	17,707,615	13,437,786
Principal collector of customs (duty guarantees)	5,193,601	1,920,002	5,193,601	1,920,002
Shipping guarantees	2,789,678	4,985,445	2,789,678	4,985,445
Documentary credit	38,918,184	22,354,686	38,918,184	22,354,686
Performance bonds	6,275,178	5,285,654	6,275,178	5,285,654
Forward exchange contracts	69,229,821	82,943,485	69,229,821	82,943,485
Commitments in ordinary course of business – commitments for unutilised credit facilities	121,146,827	89,963,162	121,146,827	89,963,162
Capital expenditure approved by the Board of Directors
Contracted	840,881	652,954	840,881	652,954
Not contracted	–	8,170	–	8,170
	262,236,519	222,538,011	262,236,519	222,538,011

58.1.1 Impairment for expected credit loss – credit related contingent liabilities and commitments

	BANK/GROUP
As at 31 December	2025 LKR ’000	2024 LKR ’000
Stage 1
Balance at beginning	713,480	625,189
Charge to income statement	15,536	88,291
Balance on 31 December	729,016	713,480
Stage 2
Balance at beginning	108,915	81,149
(Reversal)/Charge to income statement	(23,595)	27,766
Balance on 31 December	85,320	108,915
Stage 3
Balance at beginning	685,573	–
(Reversal)/charge to income statement	(199,487)	685,573
Balance on 31 December	486,086	685,573
Total	1,300,422	1,507,968

Classified under other liabilities in Note 50 on page 458.

58.2 Litigation Against the Bank

58.2.1 A client has initiated action against five Defendants including the Bank in the District Court of Kurunegala, claiming that a property mortgaged by him to the Bank had been unlawfully transferred to a third party under the parate process, and also claiming damages from the Bank. The Bank is defending this action.

58.2.2 There are two actions initiated in the District Court of Kandy and one action initiated in District Court of Negombo, where third parties are claiming ownership of properties acquired by the Bank under recovery action. The Bank is defending these actions before the respective District Courts.

58.2.3 There are two actions initiated in the District court of Theldeniya, where third parties are claiming ownership of properties mortgaged to the Bank. The Bank is defending these actions before the District Court of Theldeniya.

58.2.4 A client has initiated an action in the District court of Matara claiming damages from the Bank, alleging that a loan was not disbursed in a lump sum but in installments based on the client’s progress and as such his business went into decline and he suffered losses. The Bank is defending the action before the District Court of Matara.

58.2.5 An action has been initiated in the Labour Tribunal by one ex-employee of the Bank, claiming compensation from the Bank. This action has been laid by the President of the Labour Tribunal since a connected money recovery action initiated by the Bank has commenced.

58.2.6 Action has been initiated in High Court of Galle (Appeal case against the order of the Labour Tribunal Galle) against the Bank by the ex employee.

58.2.7 Action has been initiated in Labour Tribunal in Colombo by ex-employee of the bank claiming compensation from the bank. This action has been laid by the President of the Labour Tribunal.

58.2.8 An action initiated in the District Court of Galle, in which a customer was claiming damages against the Bank was dismissed by the court. The customer has preferred an appeal against the said decision. The Bank is defending the appeal in the Civil Appellate High Court of Galle. According to the judgment delivered in Civil Appellate High Court of Galle, the District Court of Galle is directed to commence proceedings from the point at which the proceedings of the pre trial ended.

58.2.9 Three Defendants in a money recovery action initiated by the bank has made counter claims for damages. The bank is defending the said counter claims.

58.2.10 An action for damages has been instituted against the Bank by an heir to the estate of a deceased customer, whose property has been acquired and sold by the Bank consequent to a legal recovery process. The Bank is defending this action before the District Court.

58.3 Tax Assessments Against the Bank/Group

There are no assessments against the Bank/Group on substantive matters by the Department of Inland Revenue which requires disclosures in the Financial Statements. The Bank/Group is of the view that, tax assessments against the Bank/Group will not have any significant impact on the Financial Statements.

The Group’s related parties include associate, subsidiaries, trust established by the Bank for post-employment retirement plan, joint venture, entities which are controlled, or jointly controlled by Key Management Personnel or their close family members.

The Bank carried out transactions in the ordinary course of business on an arm’s length basis at commercial rates with parties who are defined as related parties as per the Sri Lanka Accounting Standard – LKAS 24 – “Related Party Disclosures”, other than, transactions that the Key Management Personnel (KMP) have availed under schemes uniformly applicable to all staff at concessionary rates.

59.1 Parent and Ultimate Controlling Party

The Bank does not have an identifiable parent of its own.

59.2 Transaction with Key Management Personnel

59.2.1 Key Management Personnel

Key Management Personnel are the Board of Directors of the Bank including Chief Executive, Deputy Chief Executive, Vice President – Strategic Planning and Subsidiaries, Chief Risk Officer, Chief Financial Officer, Chief Operating Officer, and Senior Vice President – Treasury and Resource Mobilisation and capital market for the purpose of Sri Lanka Accounting Standard – LKAS 24 on “Related Party Disclosures”.

59.2.2 Compensation of Directors and Other Key Management Personnel

	BANK		GROUP
For the year ended 31 December	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
Number of persons	13	15	17	17
Short-term employment benefits	272,978	224,861	316,091	251,413
Post-employment benefits – Pension	1,654	702	1,654	702
– Others	27,868	21,453	27,868	22,081
	302,500	247,016	345,613	274,196

59.2.3 Other Transactions with Key Management Personnel and their Close Family Members

59.2.3.1 Statement of financial position – Bank

As at 31 December	2025		2024
As at 31 December	Number of KMPs	LKR ’000	Number of KMPs	LKR ’000
Assets
Financial assets at amortised cost – Loans and advances to customers	11	24,432	17	39,583
		24,432		39,583
Liabilities
Financial liabilities at amortised cost – Due to depositors	34	808,058	34	926,659
Financial liabilities at amortised cost – Due to other borrowers	01	5,221	02	32,605
		813,279		959,264
Contingent liabilities and commitments		36,703		36,330

Income statement – Bank

For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
Interest income	1,314	2,432
Interest expense	113,979	92,023
Fee and commission income	202	157
Net gains from trading	–	13
Net other operating income	155	(38)

59.3 Transaction with Entities in which Directors of the Bank have Significant Influence

Statement of Financial Position – Bank

As at 31 December	2025 LKR ’000	2024 LKR ’000
Assets
Financial assets at amortised cost – loans and advances to customers	2,472,102	1,196,404
	2,472,102	1,196,404
Liabilities
Financial liabilities at amortised cost – due to depositors	3,450,831	4,782,506
Debt securities issued	5,164	5,162
	3,455,995	4,787,668
Contingent liabilities and commitments	858,935	121,916

Income Statement – Bank

For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
Interest income	236,249	137,921
Interest expenses	291,816	411,043
Fee and commission income	9,596	170
Other operating expenses	4,761	4,186
Net other operating income	21	94

59.4 Transaction with Group Entities

The Group entities include the subsidiaries, associate, and joint venture of the Bank.

59.4.1 Transactions with Subsidiaries

Statement of financial position – Bank

As at 31 December	2025 LKR ’000	2024 LKR ’000
Assets
Financial assets at amortised cost-loans to and receivables from other customers	50	–
Other assets	61,429	44,634
	61,479	44,634
Liabilities
Financial liabilities at amortised cost – due to depositors	853,811	785,266
Financial liabilities at amortised cost – due to other borrowers	5,825	2,711
	859,636	787,977
Contingent liabilities and commitments	1,950	5,403

Income statement – Bank

For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
Interest expense	73,138	73,584
Fee and commission income	348	302
Net other operating income	158,685	87,127
Other operating expenses net of reimbursements	134,650	145,262

Other transactions – Bank

For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
Payments made for purchase of computer software	32,744	30,654

59.4.2 Transactions with Joint Venture/ASSET HELD FOR SALE

Statement of financial position – Bank

As at 31 December	2025 LKR ’000	2024 LKR ’000
Assets
Financial assets at amortised cost – loans and advances to customers	–	283,367
	–	283,367
Liabilities
Financial liabilities at amortised cost – due to depositors	–	3,432
	–	3,432
Contingent liabilities and commitments	–	966,633

Income statement – Bank

For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
Interest income	–	21,920
Fee and commission income	–	130
Other operating expenses	–	4,675

59.4.3 Transactions with Associate

Statement of financial position – Bank

As at 31 December	2025 LKR ’000	2024 LKR ’000
Liabilities
Financial liabilities at amortised cost – due to depositors	31	38
	31	38

Income statement – Bank

For Year ended 31 December	2025 LKR ’000	2024 LKR ’000
Fee and commission income	1	–
	1	–

59.5 Transactions with DFCC Bank Pension Fund – Trust

DFCC Bank Pension Fund constituted as a Trust was established by the DFCC Bank to discharge defined benefit pension liability of eligible employees of the Bank.

As at 31 December	Note	2025 LKR ’000	2024 LKR ’000
Contribution prepaid as at beginning		447,990	443,250
Contribution due for the financial year recognised as an (expense)/income in income statement		(13,081)	23,290
Recognition of actuarial loss in the other comprehensive income		(86,899)	(18,550)
Contribution prepaid	48.1.2	348,010	447,990

During the year 2025, DFCC Bank has carried out transactions related to sale of Treasury Bills amounting to LKR 0.94 Bn with DFCC Bank Pension Fund at the prevailing market rates.

59.6 Transactions with Government of Sri Lanka (GOSL) and its Related Entities

Entities related to the Government of Sri Lanka (GOSL) by virtue of their aggregate shareholdings has the power to participate in the financial and operating policy decision of the Bank and by extension to participate in the financial and operating policy decisions of the Bank. However, in fact this power was not exercised.

Paragraph 25 of Sri Lanka Accounting Standard Related Party Disclosure – LKAS 24 has exempted DFCC Bank from the normally applicable disclosure requirements on transactions with GOSL – related entities. In making use of this exemption the Board has determined that the limited disclosure required under paragraph 26 of LKAS 24 is only required to be made for transaction that are individually significant because of their size although these transactions were undertaken on normal market terms in the ordinary course of business and there was no requirement to disclose the transactions to regulatory or supervisory authorities or require shareholder approval.

Individually Significant Transactions Included in the Statement of Financial Position – Bank

As at 31 December	2025 LKR ’000	2024 LKR ’000
Assets
Balances with Central Bank of Sri Lanka	2,952,879	2,328,346
Placements with banks	13,177,362	4,573,215
Financial assets measured at fair value through profit or loss	3,035,975	1,828,696
Financial assets at amortised cost – loans and advances to customers	16,235,785	17,854,794
Financial assets at amortised cost – debt and other instruments	114,578,866	105,424,311
Financial assets measured at fair value through other comprehensive income	89,724,485	113,099,228
Other assets	121,206	133,669
	239,826,558	245,242,259
Liabilities
Due to banks	–	3,100,607
Financial liabilities at amortised cost – due to depositors	8,560,242	3,283,148
Financial liabilities at amortised cost – due to other borrowers	22,564,139	20,238,402
Debt securities issued	3,688,789	6,135,322
Subordinated term debt	381,548	4,235,512
	35,194,718	36,992,991
Commitments
Undrawn credit facilities	94,642	2,099,815
Forward exchange contracts	68,513,562	65,613,029

For the year ended 31 December	2025 LKR ’000	2024 LKR ’000
Income Statement – Bank
Interest income	29,558,981	30,827,008
Interest expense	3,489,237	2,441,895
Fee and commission income	9,826	15,100
Net gain from trading	–	4,734
Net gain from derecognition of financial assets	19,012	423,882
Net other operating income	6	–
Impairment (reversal)/charge	(4,676,501)	573,358

There are no other transactions that are collectively significant with government related entities.

59.7 Disclosure Requirement Under Section 9.14.8 (1) and 9.14.8 (2) of the CSE Listing Rules

As per Rule No. 9.14.8 (1) the Bank does not have any non-recurrent related party transactions carried out during the financial year under review with a value exceeding 10% of the equity or 5% of the total assets whichever is lower, as per the Audited Financial Statements of the Bank.

As per Rule No. 9.14.8 (2) the Bank does not have any recurrent related party transactions (loans and advances) carried out during the financial year under review with value exceeding 10% of the gross revenue/income, as per the latest Audited Financial Statements of the Bank.

59.8 Pricing Policy and Terms for Transactions with Related Parties

Bank enters into transactions with related parties in the ordinary course of business on terms similar to comparable transactions with an unrelated comparable counterparty with the exception of accommodation granted to Key Management Personnel under approved schemes uniformly applicable to all or specific categories of employees. The terms include pricing for loans, deposits, and services, collateral obtained for loans where appropriate.

Accounting Policy

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses relating to transactions with any of the Group’s other components, whose operating results are regularly reviewed by the Group’s Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Group’s CEO (being the CODM) include items that are directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Bank’s headquarters), expenses, tax assets, and liabilities.

60.1 Basis for Segmentation

The Group has the following four strategic divisions, which are reportable segments. These divisions offer different products and services, and are managed separately based on the Group’s management and internal reporting structure.

Corporate Banking	Loans, deposits and other transactions and balances with corporate customers
Retail Banking and SME	Loans, deposits and other transactions and balances with retail and SME customers
Treasury	Funding and centralised risk management activities through borrowings, issues of debt securities, use of derivatives for risk management purposes and investing in liquid assets such as short-term placements and corporate and government debt securities
Other	Revenue and expenses attributable to the incorporated business segments of industrial estate management, unit trust management, stock brokering and consultancy services are included in the column for others.

Segment performance is evaluated based on operating profits or losses which are measured differently from operating profits or losses in the consolidated financial statements. Income taxes are managed on a group basis and are not allocated to operating segments.

The Group’s Management Committee reviews internal management reports from each division at least monthly.

60.2 Information about Reportable Segments

Information related to each reportable segment is set out below. Segment profit before tax, as included in internal management reports reviewed by the Group’s Management Committee, is used to measure performance because Management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate within the same industries. Inter-segment pricing is determined on an arm’s length basis. Eliminations are the consolidation adjustments for inter-company transactions, dividend and dividend payable attributable to minority shareholders.

Corporate Banking		Retail Banking and SME		Treasury			Other		Unallocated		Total
2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000		2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000	2025 LKR ’000	2024 LKR ’000
For the year ended 31 December
Net interest income	9,929,517	11,369,984	1,224,229	(4,425,159)	22,677,795	25,293,467		81,865	80,685	(2,878,819)	(4,117,065)	31,034,587	28,201,912
Inter Segment	(6,775,105)	(8,231,119)	13,057,473	15,869,873	(13,850,233)	(15,329,536)		–	–	7,567,865	7,690,782	–	–
Total revenue from external customers	3,154,412	3,138,865	14,281,702	11,444,714	8,827,562	9,963,931		81,865	80,685	4,689,046	3,573,717	31,034,587	28,201,912
Net fees and commission income	1,786,913	1,256,540	5,345,967	2,891,898	83,593	(25,038)		(525)	(788)	96,624	805,821	7,312,572	4,928,433
Net gains from trading	209,539	198,405	372,670	136,838	1,898,888	937,381		–	–	42	255	2,481,139	1,272,879
Net gains from derecognition of financial assets	–	–	–	–	1,687,725	3,868,231		–	–	–	–	1,687,725	3,868,231
Net other operating income	12,626	16,945	(23,727)	40,326	278,532	–		582,969	594,784	1,353,863	1,118,839	2,204,263	1,770,894
Total operating income	5,163,490	4,610,755	19,976,612	14,513,776	12,776,300	14,744,505		664,309	674,681	6,139,575	5,498,632	44,720,286	40,042,349
Impairment for loans and other losses	(3,505,277)	(1,041,117)	(2,573,116)	(1,204,521)	(87,101)	(483,993)		–	–	1,239,211	(1,918,729)	(4,926,283)	(4,648,360)
Net operating income/ Segment Result	1,658,213	3,569,638	17,403,496	13,309,255	12,689,199	14,260,512		664,309	674,681	7,378,786	3,579,903	39,794,003	35,393,989
Operating profit after taxes on financial services												15,950,195	13,818,037
Share of profits of associate												3,100	1,536
Profit for the year from discontinued operation												300,962	1,377,926
Income tax expense												(4,722,753)	(5,265,098)
Non-controlling interest												162,720	154,885
Net profit for the year, attributable to equity holders of the Bank												11,368,784	9,777,516
As at 31 December
Segment assets	205,606,323	157,101,977	309,802,364	235,442,678	297,459,515	284,347,431		1,311,141	1,134,776	44,060,401	31,857,398	858,239,744	709,884,260
Segment liabilities	131,582,721	77,820,448	433,111,822	388,001,390	168,587,386	137,739,071		655,150	670,928	15,607,475	15,805,873	749,544,555	620,037,710
For the year ended 31 December Information on cash flows
Cash flows from operating activities	–	–	–	–	–	–		–	–	–	–	(10,051,731)	24,513,417
Cash flows from investing activities	–	–	–	–	–	–		–	–	–	–	18,447,160	(29,383,369)
Cash flows from financing activities	–	–	–	–	–	–		–	–	–	–	27,099,470	(14,034,131)
Net cash flows generated during the year	–	–	–	–	–	–		–	–	–	–	35,494,899	(18,904,083)
Capital expenditure:
Property, plant and equipment	–	–	–	–	–	–		1,419,414	1,033,032	–	–	1,419,414	1,033,032
Intangible assets	–	–	–	–	–	–		1,152,637	459,874	–	–	1,152,637	459,874
Total capital expenditure	–	–	–	–	–	–		2,572,051	1,492,906	–	–	2,572,051	1,492,906

There have been no events subsequent to the reporting date, which would have any material effect on the Bank, other than the following:

61.1 First and Final Dividend

The Directors have approved the payment of a first and final dividend of LKR 7.50 per share which will consist of LKR 2.50 per share in cash and LKR 5.00 in the form of a scrip dividend, for the financial year ended 31 December 2025. The Board of Directors confirms that the Bank has satisfied the solvency test in accordance with Section 57 of the Companies Act No. 07 of 2007 and has obtained the certificate from the Auditor.

61.2 Issuance of Basel III Compliant GSS+ Bond

The Bank raised LKR 10 Bn on 13 February 2026, through the issuance of One Hundred Million (100,000,000) Basel III compliant, subordinated, listed, rated, unsecured, redeemable GSS+ bonds with a non-viability conversion feature, each at an issue price (par value) LKR 100/- with maturity terms of 5, 7 and 10 years.

61.3 Proposed Acquisition of the wealth and retail banking business of standard chartered bank of sri lanka branch

DFCC Bank PLC has entered into a binding Business Sale Agreement ( BSA) with Standard Chartered Bank, United Kingdom, to acquire the wealth and retail banking operations of Standard Chartered Bank Sri Lanka for purchase consideration of LKR 3.7 Bn and has received approval from the Central Bank of Sri Lanka, in terms of Section 12 (1) (c) of the Banking Act No. 30 of 1988 (as amended), to proceed with the proposed acquisition.

Following receipt of this regulatory approval, DFCC Bank will proceed with the next phase of the transaction, including the planned migration and integration activities. The transaction is expected to be concluded by 2Q 2026.

The information has been reclassified with the current year’s classification in order to provide a better presentation.

As at 31 December	Current presentation – 2024		As disclosed previously – 2024
As at 31 December	BANK LKR ’000	GROUP LKR ’000	BANK LKR ’000	GROUP LKR ’000
Statement of Financial Position
Financial assets at amortised cost – Loans and advances to customers	395,047,053	395,047,053	394,361,480	394,361,480
Other liabilities and provisions	12,792,333	13,231,205	12,106,706	12,545,632

Accounting Policy

The Board of Directors of the Bank is responsible for the preparation and presentation of these Financial Statements. Please refer page 295 for the Statement of Directors’ Responsibility.

Other Disclosure Requirements Under the Prescribed Format Issued by the Central Bank of Sri Lanka for Preparation of Annual Financial Statements of Licensed Commercial Banks

Disclosure Requirements		Description
1.	Information about the Significance of Financial Instruments for Financial Position and Performance
1.1	Statement of Financial Position
1.1.1	Disclosures on categories of financial assets and financial liabilities	Notes to the financial statements: Note 25 – Classification of financial assets and financial liabilities
1.1.2	Other Disclosures
	i. Special disclosures about financial assets and financial liabilities designated to be measured at fair value through profit or loss, including disclosures about credit risk and market risk, changes in fair values attributable to these risks and the methods of measurement	Not designated Principal accounting policies: Note 5.3.9 – Designation at fair value through profit or loss
		Notes to the financial statements: Note 08 – Financial risk review
	ii. Reclassifications of financial instruments from one category to another	Principal accounting policies: Note 5.3.3 – Reclassification of financial assets
	iii. Information about financial assets pledged as collateral and about financial or non–financial assets held as collateral	Notes to the financial statements: Note 46.1 – Assets pledged as security
	iv. Reconciliation of the allowance account for credit losses by class of financial assets	Notes to the financial statements:
		Note 32.1.4 – Financial assets at amortised cost – loans & advances to customers
		Note 33.1.4 – Financial assets at fair value through other comprehensive income - loans and advances to customers
		Note 34.5 – Financial assets at amortised cost – debt and other instruments
		Note 35.7 – Financial assets measured at fair value through other comprehensive income
	v. Information about compound financial instruments with multiple embedded derivatives	The Bank does not have compound financial instruments with multiple embedded derivatives
	vi. Breaches of terms of loan agreements	None
1.2	Statement of Comprehensive Income
1.2.1	Disclosures on items of income, expense, gains and losses	Notes to the financial statements: Notes 10 to 22
1.2.2	Other Disclosures
	i. Total interest income and total interest expense for those financial instruments that are not measured at fair value through profit and loss	Notes to the financial statements: Note 11 – Net interest income
	ii. Fee income and expense	Notes to the financial statements: Note 12 – Net fee and commission income
	iii. Amount of impairment losses by class of financial assets	Notes to the financial statements: Note 16 – Impairment for loans and other losses
	iv. Interest income on impaired financial assets	Notes to the financial statements: Note 11 – Net interest income
1.3	Other Disclosures	Principal accounting policies:
1.3.1	Accounting policies for financial instruments	Note 5.3 – Financial assets and Financial liabilities
1.3.2	Financial liabilities designated as at FVTPL	Notes to the financial statements: Note 30 – Financial Assets Measured at Fair Value Through Profit or Loss

Disclosure Requirements		Description
1.3.3	Investments in equity instruments designated as at FVOCI	Notes to the financial statements:
	i. Details of equity instruments that have been designated as at FVOCI and the reasons for the designation;	Note 35 – Financial Assets Measured at Fair Value Through Other Comprehensive Income
	ii. Fair value of each investment at the reporting date;	Note 35.1 – PDI Bonds Notes 35.2 – Quoted Ordinary Shares and Notes 35.3 – Unquoted Ordinary Shares
	iii. Dividends recognised during the period, separately for investments derecognised during the reporting period and those held at the reporting date;	Note 15 – Net Other Operating Income
	iv. Any transfers of the cumulative gain or loss within equity during the period and the reasons for those transfers	Statement of Profit or Loss and Other Comprehensive Income and Statement of Changes in Equity
	v. If investments in equity instruments measured at FVOCI are derecognised during the reporting period,	Statement of Profit or Loss and Other Comprehensive Income and Statement of Changes in Equity
	– reasons for disposing of the investments;
	– fair value of the investments at the date of derecognition; and
	– the cumulative gain or loss on disposal.
1.3.4	Reclassifications of financial assets
1.3.5	Information on hedge accounting.	Notes to the financial statements: Note 29 – Derivative financial assets/liabilities
1.3.6	Information about the fair values of each class of financial asset and financial liability, along with:
	i. Comparable carrying amounts	Notes the financial statements: Notes 9.1 to 9.4.9 – Fair values of financial instruments
	ii. Description of how fair value was determined	Notes to the financial statements: Note 9 – Fair values of financial instruments
	iii. The level of inputs used in determining fair value	Notes to the financial statements: Notes 9.1 – Valuation models
	iv. a. Reconciliations of movements between levels of fair value measurement hierarchy b. Additional disclosures for financial instruments that fair value is determined using level 3 inputs	There were no movements between level of fair value hierarchy during the year under review
	v. Information if fair value cannot be reliably measured	Notes to the financial statements: Notes 9.4 to 9.4.9
2.	Information about the Nature and Extent of Risks Arising from Financial Instruments
2.1	Qualitative Disclosures
2.1.1	Risk exposures for each type of financial instrument	Notes to the financial statements: Note 8 – Financial risk review
2.1.2	Management’s objectives, policies, and processes for managing those risks	Notes to the financial statements: Note 8 – Financial risk review
2.1.3	Changes from the prior period	Notes to the financial statements: Note 62 – Comparative figures
2.2	Quantitative Disclosures
2.2.1	Summary of quantitative data about exposure to each risk at the reporting date	Notes to the financial statements: Note 8 – Financial risk review
2.2.2	Disclosures about credit risk, liquidity risk, market risk, operational risk, interest rate risk and how these risks are managed.
	i. Credit Risk
	a. Maximum amount of exposure (before deducting the value of collateral), description of collateral, information about credit quality of financial assets that are neither past due nor impaired and information about credit quality of financial assets.	Notes to financial statements: Note 8.2.3 – Credit quality analysis
		Note 8.2.3 – Credit quality analysis

Disclosure Requirements		Description
	b. For financial assets that are past due or impaired, disclosures on age, factors considered in determining as impaired and the description of collateral on each class of financial asset.	Notes to the financial statements: Note 8.2.3 – Credit quality analysis
		Note 8.2.4 – Collateral held and other credit enhancement
		Note 8.2.5 – Amounts arising from ECL
	c. Information about collateral or other credit enhancements obtained or called.	Notes to the financial statements: Note 8.2.4 – Collateral held and other credit enhancements
	d. For other disclosures, please refer Banking Act Direction No. 7 of 2011 on Integrated Risk Management Framework for Licensed Banks (Section H).	Notes to the financial statements: Note 8.2 – Credit risk (Financial risk review)
	ii. Liquidity Risk
	a. A maturity analysis of financial liabilities.	Notes to the financial statements: Notes 8.3.3 – Maturity analysis for financial liabilities and financial assets
	b. Description of approach to risk management.	Notes to the financial statements: Note 8 – Financial risk review
	c. For other disclosures, please refer Banking Act Direction No. 7 of 2011 on Integrated Risk Management Framework for Licensed Banks (Section H).	Notes to the financial statements: Note 8.3 – Liquidity risk (Financial risk review)
	d. For other disclosures, refer Pillar III disclosures of the Banking Act Directions No. 01 of 2016 on Capital Requirements under Basel III for Licensed Banks.	Supplementary Information Quantitative Disclosures as per Schedule Iii of the Banking Act Direction No. 01 of 2016, Capital Requirements Under Basel Iii
	iii. Market Risk
	a. A sensitivity analysis of each type of market risk to which the entity is exposed.	Notes to the financial statements: Note 8.4 – Market risk financial risk review
	b. Additional information, if the sensitivity analysis is not representative of the entity’s risk exposure.	None
	c. For other disclosures, please refer Banking Act Direction No. 7 of 2011 on Integrated Risk Management Framework for Licensed Banks (Section H).	Notes to the financial statements: Note 8.4 – Market risk financial risk review
	d. For other disclosures, refer Pillar III disclosures of the Banking Act Directions No. 01 of 2016 on Capital Requirements under Basel III for Licensed Banks.	Supplementary Information Quantitative Disclosures as per Schedule Iii of the Banking Act Direction No. 01 of 2016, Capital Requirements Under Basel Iii
	iv. Operational Risk
	a. Please refer Banking Act Direction No. 7 of 2011 on Integrated Risk Management Framework for Licensed Banks (Section H).	Notes to the financial statements: Note 8.5 – Operational risk financial risk review
	b. For other disclosures, refer Pillar III disclosures of the Banking Act Directions No. 01 of 2016 on Capital Requirements under Basel III for Licensed Banks.	Supplementary Information Quantitative Disclosures as per Schedule Iii of the Banking Act Direction No. 01 of 2016, Capital Requirements Under Basel Iii
	v. Equity Risk in the Banking Book
	a. Qualitative Disclosures
	Differentiation between holdings on which capital gains are expected and those taken under other objectives including for relationship and strategic reasons.	Notes to the financial statements: Note 8.4.2.1 – Equity price risk
	Discussion of important policies covering the valuation and accounting of equity holdings in the banking book.	Note 5.1.1 to 5.1.7 – Basis of consolidation Note 36 – Investments in subsidiaries Note 37 – Investments in associates Note 43 – Asset held for sale

Disclosure Requirements		Description
	b. Quantitative Disclosures
	Value disclosed in the statement of financial position of investments, as well as the fair value of those investments; for quoted securities, a comparison to publicly quoted share values where the share price is materially different from fair value.	Notes to the financial statements: Note 30 – Financial assets measured at fair value through profit or loss Note 35 – Financial assets measured at fair value through other comprehensive income
	The types and nature of investments. The cumulative realised gains/(losses) arising from sales and liquidations in the reporting period.	Notes to the financial statements: Note 13 – Net gains from trading Note 14 – Net gains from derecognition of financial assets
	vi. Interest Rate Risk in the Banking Book
	a. Qualitative Disclosures Nature of interest rate risk in the banking book (IRRBB) and key assumptions.	Notes to the financial statements: Note 8 – Financial risk review
	b. Quantitative Disclosures	Notes to the financial statements: Note 8 – Financial risk review Note 8.4.4.1 – Potential impact on NII due to change in market interest rates
	The increase/(decline) in earnings or economic value (or relevant measure used by management) for upward and downward rate shocks according to management’s method for measuring IRRBB, broken down by currency (as relevant).
2.2.3	Information on concentrations of risk.	Notes to the financial statements: Note 8 – Financial risk review
3.	Other Disclosures
3.1	Capital
3.1.1	Capital Structure
	i. Qualitative Disclosures.	Notes to the financial statements: Note 8.6.1 – Key regulatory ratios – capital adequacy
	Summary information on the terms and conditions of the main features of all capital instruments, especially in the case of innovative, complex or hybrid capital instruments.
	ii. Quantitative Disclosure	Notes to the financial statements: Note 8.6.1 – Key regulatory ratios – capital adequacy
	a. The amount of Tier 1 capital, with separate disclosure of: Paid-up share capital/common stock Reserves Non-controlling interests in the equity of subsidiaries Innovative instruments Other capital instruments Deductions from Tier 1 capital b. The total amount of Tier 2 and Tier 3 capital c. Other deductions from capital d. Total eligible capital
3.1.2	Capital adequacy
	i. Qualitative Disclosures	Notes to the financial statements: Note 8.6 – Capital management
	A summary discussion of the Bank’s approach to assessing the adequacy of its capital to support current and future activities.
	ii. Quantitative Disclosures
	a. Capital requirements for credit risk, market risk and operational risk	Notes to the financial statements: Note 8.6 – Capital management
	b. Total and Tier 1 capital ratio	Notes to the financial statements: Note 8.6.1 – Key regulatory ratios – capital adequacy

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1. REPORTING ENTITY

1.1 Corporate information

1.2 Consolidated financial statements

1.3 Parent Entity and Ultimate Parent Entity

1.4 Principal business activities, nature of operations of the Group and ownership by the Bank in its subsidiaries, associates.

1.5 Approval of Financial Statements

1.6 Responsibility for Financial Statements

2. BASIS OF ACCOUNTING

2.1 Statement of Compliance

2.2 Presentation of Financial Statements

2.3 Basis of Measurement

Financial Instruments

Non-Financial Assets/Liabilities

2.4 Materiality and Aggregation

2.5 Going concern

2.6 Comparative information

3. Functional and Presentation Currency

4. Use of Judgements and Estimates

4.1 key Judgements

4.2 Assumptions and estimation uncertainties

5. Material Accounting Policies

5.1 Basis of consolidation

5.1.1 Business combinations

5.1.2 Subsidiaries

5.1.3 Non-controlling interests (NCI)

5.1.4 Loss of control

5.1.5 Interests in equity-accounted investees

5.1.6 Transactions eliminated on consolidation

5.1.7 Financial statements of subsidiaries, and associate company, included in the consolidated financial statements

5.2 Foreign currency

5.2.1 Foreign currency transactions

5.2.2 Foreign operations

5.3 Financial assets and financial liabilities

5.3.1 Recognition and initial measurement

5.3.2 Classification

5.3.2.1 Financial assets

5.3.2.1.1 Business model assessment

5.3.2.1.2 Assessment of whether Contractual Cash Flows are Solely Payments of Principal and Interest (SPPI)

5.3.2.2 Financial liabilities

5.3.2.2.1 Financial liabilities at amortised cost

5.3.2.2.2 Financial liabilities at fair value through profit or loss

5.3.3 Reclassifications

5.3.4 Derecognition

5.3.4.1 Financial assets

5.3.4.2 Financial liabilities

5.3.5 Modifications of financial assets and financial liabilities

5.3.5.1 Financial assets

5.3.5.2 Financial liabilities

5.3.6 Offsetting

5.3.7 Fair value measurement

5.3.8 Impairment

5.3.9 Designation at fair value through profit or loss

5.4 Impairment of non-financial assets

6. CHANGES IN MATERIAL ACCOUNTING POLICIES

7. STANDARDS ISSUED BUT NOT YET ADOPTED

8. Financial Risk Review

8.1 Introduction and Overview

Risk Management Framework

8.2 Credit Risk

8.2.1 Settlement Risk

8.2.2 Management of Credit Risk

8.2.3 Credit Quality Analysis – Bank

8.2.3.1 Loans and advances to customers at amortised cost – gross carrying amount

8.2.3.2 Loans and advances to customers at fair value through other comprehensive income – gross carrying amount

8.2.3.3 The following table shows an analysis of counterparty credit exposures arising from

derivative transactions.

8.2.4 Collateral Held and Other Credit Enhancements – Bank

8.2.4.1 Collateral held and other credit enhancements – Measured at amortised cost

8.2.4.2 collateral held and other credit enhancements – measured at fair value through other comprehensive income

8.2.4.3 Derivatives, Reverse Sale-and-Repurchase Agreements and Securities Borrowing

8.2.4.4 Loan to Value Ratio of Residential Mortgage Lending

8.2.4.5 Assets Obtained by Taking Possession of Collateral

8.2.4.6 Analysis of Credit Risk by Risk Rating

8.2.5 Amounts Arising from ECL – Bank

8.2.5.1 FORWARD LOOKING INFORMATION

Financial assets at amortised cost – Loans and advances to customers – ECL

Financial assets at amortised cost – debt and other instruments – ecL

Loan commitments and financial guarantee contracts