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Capital Position

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

"DFCC's ratings are driven by its strong capitalisation supported by ongoing high profitability," the rating agency said.

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



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"

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

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

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

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

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