Financial review

This Financial Review presents a comprehensive analysis of the Bank’s financial performance for the year ended December 31, 2025, highlighting the principal drivers of growth, profitability, capital strength and overall financial resilience. It provides detailed insight into the key factors that shaped performance during the year and the effectiveness of the execution of its strategies.

This section should be read in conjunction with the Operating Environment and Outlook, which outlines the global, domestic and industry developments that influenced the Bank’s financial performance and risk landscape.

Further context is provided in the sections on Strategic Priorities and Value Creation. This Section together with the Financial Review explains how the Bank strengthened both its financial and non-financial capitals, demonstrating how disciplined strategy execution, responsible banking practices and long-term priorities collectively underpin sustainable value creation.

Within this economic and strategic context, the Bank delivered a strong financial performance in 2025. For the financial year 2025 (FY2025), the Group and Bank achieved robust growth, with net profits increasing by 9.43% and 8.16% respectively. When measured against normalised FY2024 earnings – adjusted for the one-off accounting impact of the Sri Lanka International Sovereign Bond (SLISB) restructuring – profit growth stood at 44.35% for the Group and 44.05% for the Bank.

The detailed breakdown of the Group’s and the Bank’s financial performance for the year ended December 31, 2025 is given in the Table below. The core financial soundness indicators are presented in the Table 50. The movements in income, expenses and profitability discussed in this Financial Review should be read in conjunction with the figures set out therein. In view of the significant accounting adjustments that arose from the Government of Sri Lanka’s Debt Restructuring Programme concluded in December 2024, which included the derecognition of SLISBs, recognition of day-one losses, reversal of cumulative impairment provisions and related tax adjustments, the FY2024 results are presented on a normalised basis to facilitate a more meaningful comparison of underlying performance between FY2025 and FY2024.

Income Statement Table – 44

	GROUP			BANK
For the year ended December 31,	2025 Rs. ’000 As reported	2024 Rs. ’000 Normalised	Change %	2025 Rs. ’000 As reported	2024 Rs. ’000 Normalised	Change %
Gross income	365,180,892	319,614,243	14.26	354,811,337	312,051,178	13.70
Interest income	301,366,595	275,217,117	9.50	293,614,476	269,596,222	8.91
Less: Interest expense	160,406,053	157,082,433	2.12	157,320,369	155,037,883	1.47
Net interest income	140,960,542	118,134,684	19.32	136,294,107	114,558,339	18.97
Fee and commission income	42,592,091	34,480,523	23.53	40,958,424	33,246,118	23.20
Less: Fee and commission expense	13,616,570	10,834,345	25.68	13,462,222	10,716,909	25.62
Net fee and commission income	28,975,521	23,646,178	22.54	27,496,202	22,529,209	22.05
Net gains/(losses) from trading	272,311	(2,201,010)	112.37	272,311	(2,201,010)	112.37
Net gains/(losses) from derecognition of financial assets	2,808,159	4,090,697	(31.35)	2,808,159	4,090,697	(31.35)
Net other operating income	18,141,736	8,026,916	126.01	17,157,967	7,319,151	134.43
Other operating income	21,222,206	9,916,603	114.01	20,238,437	9,208,838	119.77
Total operating income	191,158,269	151,697,465	26.01	184,028,746	146,296,386	25.79
Less: Impairment charges and other losses	23,116,497	28,738,110	(19.56)	22,506,115	27,899,024	(19.33)
Net operating income	168,041,772	122,959,355	36.66	161,522,631	118,397,362	36.42
Personnel expenses	30,187,082	27,907,458	8.17	28,840,939	26,913,870	7.16
Depreciation and amortisation	5,891,690	4,737,203	24.37	5,819,403	4,669,731	24.62
Other operating expenses	21,424,226	19,193,697	11.62	19,930,637	18,069,772	10.30
Total operating expenses	57,502,998	51,838,358	10.93	54,590,979	49,653,373	9.94
Operating profit before taxes on financial services	110,538,774	71,120,997	55.42	106,931,652	68,743,989	55.55
Less: Taxes on financial services	17,750,691	11,899,758	49.17	17,553,881	11,796,956	48.80
Operating profit after taxes on financial services	92,788,083	59,221,239	56.68	89,377,771	56,947,033	56.95
Share of profit/(loss) of associate, net of tax	(662)	(460)	(43.91)	–	–	–
Profit before tax	92,787,421	59,220,779	56.68	89,377,771	56,947,033	56.95
Less: Income tax expense	31,849,904	17,006,615	87.28	30,890,480	16,345,777	88.98
Profit for the year	60,937,517	42,214,164	44.35	58,487,291	40,601,256	44.05

As reflected in Table 44 Income Statement and further supported by the core- soundness indicators set out in Table 50, this strong bottom-line performance translated into significant value for shareholders. The Return on Equity (ROE) for the Bank improved to 19.51% representing a substantial improvement over the normalised FY2024 ROE of 16.57%. Similarly, the ROE for the Group recorded a substantial improvement to 19.61% relative to the normalised ROE of 16.59% recorded for FY2024.

Key highlights of the bottom-line performance;

• Strong growth in Net Interest Income (NII) on the back of strong Net Interest Margins (NIMs)

• Improvement in other operating income, driven by net gains on revaluation of foreign currency assets and liabilities

• Disciplined cost management despite an accelerated credit and balance sheet growth

• Strengthening the Impairment (Stage 3) to Stage 3 loans ratio to 73.50% from 64.61%.

The Group’s assets grew by 17.49%, mirrored by a healthy 17.08% increase in deposits, while the Bank’s assets recorded a 16.78% growth, supported by a deposit growth of 16.65%, with an improvement in the CASA ratio from 38.07% to 39.65%. Capitalising on the rebound in domestic economic activity, the Bank recorded a significant acceleration in credit growth to 36.37%, representing a more than two-fold increase compared to the 17.49% growth seen in FY2024.

The Group maintained a solid capital position, concluding the year with a Tier I Capital Ratio of 12.834% (FY2024: 13.968%) and a Total Capital Ratio of 16.368% (FY2024: 17.653%). The Bank’s ratios recorded at 13.035% (FY2024: 14.227%) and 16.698% (FY2024: 18.142%) respectively, both above the statutory minimum ratios applicable for the Bank of 10% and 14%, respectively.

The narrowing of capital ratios compared to FY2024 was primarily a result of the rapid credit expansion being concentrated in the second half of the year. While this led to an immediate increase in risk-weighted assets, the full interest income and resulting profitability from these new disbursements have yet to fully cycle into the retained earnings. Consequently, the earnings contribution from this growth is expected to be more comprehensively realised in the upcoming financial periods.

The Bank remains the primary driver of Group performance, accounting for 96.42% of total assets (FY2024: 97.00%) and 95.98% of the Group’s profit after tax (FY2024: 97.10%). Given this significant contribution, the following analysis provides a granular review of the Bank’s financial results.

A concise overview of our Bangladesh operations, local and foreign subsidiaries is also provided on Performance of Bangladesh operations and subsidiaries.

Review of Bank financial performance

Overview

The Bank’s financial performance for FY2025 was characterised by a 44.05% increase in Net profit compared to the normalised Net profit for FY2024, driven by a significant expansion in core and non-core income streams. Profitability was underpinned by a 24 bps improvement in the NIM to 4.51% and a 22.05% growth in net fee and commission income. Furthermore, other operating income for the FY2025 rose by 119.77%, primarily due to net revaluation gains from foreign currency assets and liabilities. Disciplined cost management ensured that operating expense growth was contained at 9.94%, resulting in an improved Cost-to-Income ratio (excluding taxes on financial services) of 29.66% in FY2025 compared to 33.94% in FY2024. While the total effective tax rate (including taxes on financial services and income tax expenses) increased to 45.30% in FY2025 (Normalised FY2024 figure: 40.94%), the robust Return on Assets (ROA) of 1.93% in FY2025 compared to the normalised ROA of 1.51% in FY2024, enabled the Bank to generate a ROE of 19.51% in FY2025, up from normalised ROE of 16.57% in FY2024.

Interest income

For FY2025, interest income grew by 8.91% to Rs. 293.61 Bn., underpinned by a 15.23% expansion in average Interest-Earning Assets (IEA). This volume growth offset a 61bps compression in the overall IEA yield, which decreased from 11.03% in FY2024 to 10.42% in FY2025. Interest income contributed 82.75% of the gross income for FY2025 compared 86.39% in FY2024

In alignment with the broader declining interest rate environment, yields across all asset classes trended downward. However, the impact was asymmetrical: Loans and Advances experienced a sharp decrease in rates, with yields falling below those of other IEAs. Other IEAs (primarily Sri Lanka Government Securities) recorded a more resilient yield profile, benefiting from high-yield lock-ins on instruments purchased during 2022-2023 period.

As shown in the Table 45 below, the composition of loans and advances within IEAs increased due to the sharp growth in loans and advances recorded, whilst other IEA recorded a decline as proceeds from maturing Government Securities was channelled to fund a part of the loan growth.

Yield on IEA and IEA mix Table – 45

	2025 %	2024 %	Variance bps
Yield on total IEA	10.42	11.03	(61)
Yield on loans and advances	10.30	11.09	(79)
Yield on other IEA	10.59	10.95	(37)
Loans and advances to total IEA	58.35	52.37
Other IEA to total IEA	41.65	47.63
Total	100.00	100.00

Interest expenses

In FY2025, interest expenses remained remarkably stable, recording only a marginal increase of 1.47% despite a significant balance sheet expansion. This efficiency was driven by a 59 bps reduction in the cost of funds, which improved to 5.99% from 6.58% in FY2024. Two primary levers underpinned this result: The timely repricing of the deposit portfolio in alignment with market rate trends and CASA ratio strengthening to 39.65% in FY2025 (up from 38.07% in FY2024).

The reduction in deposits costs and a better mix were partially offset by the growth in deposits and other interest bearing liabilities (IBL) by 15.43% and 12.53% respectively. The improvement in funding costs and the shift in funding composition is reflected in the Table 46 below.

Cost of funds and funding mix Table – 46

	2025 %	2024 %	Variance bps
Cost of funds	5.99	6.58	(59)
Cost of deposits	5.62	6.22	(60)
Cost of other IBL	10.33	10.67	(34)
Deposits to funding	92.24	91.75
Other IBL to funding	7.76	8.25
Total	100.00	100.00

Net interest income (NII)

NII grew by 18.97% to Rs. 136.29 Bn. in FY2025 from Rs. 114.56 Bn. in FY2024, due to a 8.91% growth in interest income and the controlled 1.47% increase in interest expenses.

While the Interest Spread (IEA Yield minus Cost of Funds) remained largely flat, the NIM improved by 24 bps. This expansion in NIM was driven by two key factors:

• A higher proportion of IEAs in FY2025 being funded by equity and other non-interest-bearing funding sources compared to FY2024 (14.54% vs 12.25%)

• The proportion of IEAs within the total asset base increased, ensuring more of the balance sheet was deployed in revenue-generating assets.

The combination of the 24 bps NIM improvement and the 36.37% surge in credit volume was the primary catalyst for the Bank’s overall NII growth in FY2025. The detailed movement in yield, cost of funds, spread, and margin is illustrated in the Table 47 below:

Interest spread and Net Interest Margin Table – 47

	2025 %	2024 %	Variance bps
Yield on IEA	10.42	11.03	(61)
Cost funds*	(5.99)	(6.58)	(59)
Interest spread	4.43	4.45	(2)
Yield on IEA (a)	10.42	11.03	(61)
Cost funds on IEA (b)	(5.58)	(6.34)	(76)
NIM on IEA (c = a - b)	4.84	4.69	15
IEA to total Assets (average) (d)	93.17	91.06
Net interest margin (e = c x d)	4.51	4.27	24

*As a percentage of average IBL

Net fee and commission income

Net fee and commission income rose by 22.05% in FY2025 to Rs. 27.50 Bn. from Rs. 22.53 Bn., reflecting a 23.20% expansion in fee-based revenue that outpaced the absolute growth in fee and commission-related expenses. Accordingly, Fee income in FY2025 grew to Rs. 40.96 Bn. from Rs. 33.25 Bn. in FY 2024, whilst Fee and Commission expenses grew to Rs. 13.46 Bn. from Rs. 10.72 Bn. The primary driver of this performance was the Credit and Debit Cards segment, which accounted for 48.25% of total commission income. This business line grew by 20.78% and contributed 44.08% to the total growth in fee income, supported by a 23% and 21% increase in debit and credit card transaction volumes, respectively.

In tandem with the Bank’s aggressive credit expansion, fees related to loans recorded a substantial growth of 57.14%. This segment emerged as a significant secondary driver, contributing 18.11% to the overall increase in fee income.

The growth in fee and commission expenses, which rose by 25.62%, was almost exclusively concentrated in the card services category. Credit and debit card-related costs increased by 25.10% and represented 93.76% of the total rise in commission expenses. This increase was driven by a combination of higher transaction throughput and the impact of the Sri Lankan Rupee’s depreciation against the USD, moving from Rs. 293 to Rs. 310 (5.48%) during the FY2025.

Other operating income

Other operating income more than doubled in FY2025 to Rs. 20.24 Bn., representing a 119.77% increase over the normalised FY2024 figure of Rs. 9.21 Bn. This growth was primarily driven by revaluation gains on foreign currency denominated assets and liabilities, which surged by Rs. 9.51 Bn. to Rs. 16.04 Bn. from Rs. 6.53 Bn. as a result of the Sri Lankan Rupee depreciation against the USD.

A secondary driver of this growth was the successful turnaround in Net Trading Income, which reached a positive Rs. 272.31 Mn. compared to a loss of Rs. 2.20 Bn. in FY2024. This recovery was largely driven by the improved performance of derivative positions, specifically foreign exchange swaps, where losses narrowed to Rs. 1.81 Bn. in FY2025 from Rs. 3.50 Bn. in FY2024.

Additionally, the Bank’s trading portfolio contributed to this momentum, recording a Rs. 775.97 Mn. increase in Net Trading Income.

Impairment charges

During FY2025, the total impairment charges declined by 19.33% to Rs. 22.51 Bn. compared to the normalised impairment charges and other losses recorded in FY2024 of Rs. 27.90 Bn. While the charge for loans and advances remained stable, cost of credit risk on loans and advances ratio (impairment charges on loans and advances to other customers/average gross loans and advances) improved by 37 basis points, dropping to 1.29% in FY2025 from 1.66% in FY2024.

In addition, the Bank recognised an additional impairment charge of Rs. 1.16 Bn. through management overlays to cover potential credit stress arising from the cyclone and flooding in late November 2025. This provision serves as a precautionary buffer against the evolving credit impact of these events, ensuring the balance sheet remains resilient against localised volatility.

The movements discussed above are summarised in the Table 48 below.

Impairment charges and credit quality related ratios (Rs. Bn.) Table – 48

	2025	2024	Change (%)
Impairment charges on loans and advances to other customers	22.69	22.82	(0.56)
Impairment charges on other financial assets	1.82	4.28	(57.52)
Impairment charges on other assets	(2.50)	1.02	(345.10)
	22.00	28.11	(21.73)
Direct write-offs and other	0.93	0.18	416.67
Recoveries against write-offs	(0.42)	(0.39)	7.69
	22.51	27.90	(19.32)
Cost of credit risk on loans and advances (%)	1.29	1.66	(37)*
Stage 3 Impairment Cover** (%)	73.50	64.61	889*

* Variance in bps

** Inclusive of undrawn credit

Operating expenses

Despite the aggressive expansion of the loans and advances portfolio and other assets, growth in operating expenses was contained at 9.94%. A key driver of this discipline was the management of personnel costs which increased by only 7.16%, despite the total head count increasing by 265 during FY2025. Growth in depreciation and amortisation reflected the Bank’s continued investment in its physical and digital infrastructure.

Robust revenue growth and disciplined cost management resulted in a significant improvement in the Cost-to-Income Ratio (excluding taxes on financial services), which fell to 29.66% from 33.94% in FY2024. This was primarily a result of the widening operating jaws, as income growth substantially outpaced the increase in the cost base. Furthermore, the Bank’s ability to scale efficiently was reflected in the cost-to-average assets ratio, which improved to 1.81% in FY2025 from 1.85% in FY2024.

Profit before taxes

Profit before taxes on financial services and income taxes increased by a 55.55% to Rs. 106.93 Bn. over Rs. 68.74 Bn. reported in FY2024, underpinned by a broad-based

improvement across all core revenue streams. The expansion in NII was the primary engine of this growth, contributing 56.92% of the total increase compared to the FY2024. This was bolstered by Net Fee and Commission Income, which accounted for 13.01% of the uplift. Furthermore, the turnaround in Other Operating Income and the reduction in Impairment Charges contributed 28.88% and 14.12% to the pre-tax performance, respectively.

Taxes on financial services and income taxes

The Bank’s total tax expense for FY2025 of Rs. 48.44 Bn., comprising taxes on financial services and corporate income taxes, increased by 48.80% and 88.98% respectively compared to the normalised tax expense for FY2024 of Rs. 28.14 Bn. This surge was broadly aligned with the 55.55% growth in pre-tax profits.

The aggregate tax charge as a percentage of operating profit rose to 45.30%, compared to 40.94% in FY2024. This increase in the effective tax rate was primarily driven by two factors, first being the increase in the taxable profit of Sri Lanka which attracts a higher tax and the change in the treatment of foreign exchange income, which became liable to a 15% tax during the year which was previously exempt from corporate tax.

Net profit and ROE

Despite a significantly higher tax incidence, Net Profit for FY2025 recorded a robust 44.05% increase to Rs. 58.49 Bn. compared to Rs. 40.60 Bn. reported in FY2024, primarily driven by the significant growth in Profit Before Tax.

As illustrated in the Graph 13 below, this improvement was underpinned by solid expansions in all key revenue streams. These gains were partially offset by increased operating expenses and a higher tax charge.

This bottom-line momentum resulted in a significant improvement in shareholder value, with the ROE for FY2025 increasing to 19.51%, a substantial uplift from 16.57% recorded in FY2024 (normalised).

The expansion in ROE was underpinned by a notable improvement in the ROA, which improved to 1.93% in FY2025 from 1.51% in FY2024. As evidenced by the ROE tree analysis in Table 49 below, this productivity gain was the result of a deliberate optimisation of the Bank’s earnings profile:

• Core Operating Income Expansion: A 24 bps improvement in the NIM to 4.51% and an enhanced Net Fee & Commission Income Yield of 0.91% (Net fee and commission income to average total assets) combined to push the Core Operating Income Ratio to 5.42%.

• Operating Efficiency: Disciplined cost management led to an improved Operating Expense Ratio (operating expenses to average total assets) of 1.81% (FY2024: 1.85%), ensuring a higher percentage of core income reached the bottom line.

• Asset Quality Resilience: A reduction in the Impairment Cost to Average Assets Ratio to 0.74% further bolstered the Pre-tax ROA to 3.54%

While the Total Effective Tax Rate rose to 45.30% and Leverage/Equity Multiplier moderated to 10.09 times (reflecting the Bank’s stronger capital base), the significant improvement in ROA was more than sufficient to drive the ROE to 19.51%.

The movements discussed above are summarised in the Table 49 below:

ROE Tree Analysis* Table – 49

	2025 %	2024 %
Interest income yield (a)	9.71	10.04
Interest cost (b)	(5.20)	(5.77)
NIM (c = a - b)	4.51	4.27
Net fee and commission income yield (d)	0.91	0.84
Core operating income ratio (e = c + d)	5.42	5.11
Operating expense ratio (f)	(1.81)	(1.85)
Pre-provision core profit (PPOP) ratio (g = e -f)	3.61	3.26
Non-interest/Non-fee income ratio (h)	0.67	0.36
Total PPOP ratio (i = g + h )	4.28	3.61
Cost of impairment to average assets (j)	(0.74)	(1.05)
Pre-tax ROA ( k = i – j)	3.54	2.56
Effective total tax rate (l)	(45.30)	(40.94)
ROA (m = k x (1-l))	1.93	1.51
Leverage/Equity multiplier (n)	10.09	10.96
ROE ( m x n)	19.51	16.57

*Average total assets has been used as the denominator

Other comprehensive income

Other Comprehensive Income (OCI) for the year recorded a significant turnaround, posting a gain of Rs. 2.31 Bn. in FY 2025 compared to the loss of Rs. 10.28 Bn. in FY2024. This volatility was primarily driven by the gains/(losses) generated on translation of the financial statements of foreign operations. As the Bangladesh Taka appreciated against the Sri Lankan Rupee during the period, with the exchange rate moving to 2.54 BDT/LKR from 2.45 BDT/LKR in 2024, the Bank recognised a translation gain of Rs. 2.28 Bn. in FY2025, compared to the Rs. 10.89 Bn. loss recorded in FY2024.

As a result of this favourable cross currency movement and the Bank’s strong operational performance, Total Comprehensive Income for FY2025 rose to Rs. 60.79 Bn. which represented a 100.48% increase over the FY2024 Total Comprehensive Income of Rs. 30.32 Bn.

Review of financial position

During the year 2025, the Bank’s total assets surpassed the Rs. 3 Tn. and the USD 10 Bn. milestone, reinforcing its position as the largest private sector commercial bank in the country. This growth was accompanied by two further landmarks, as the Bank became the first private sector institution to exceed Rs. 2 Tn. in gross loans and advances and Rs. 2.5 Tn. in total deposits. These achievements extend a historical legacy of market leadership, building on the Bank’s previous records as the first private sector bank to surpass the Rs. 1 Tn. mark in assets (2016), deposits (2019), and loans (2021).

Assets

Total assets grew by 16.78% to Rs. 3.26 Tn. in FY2025 (Rs. 2.79 Tn. in FY2024), primarily driven by a robust 37.48% growth in net loans and advances to Rs. 1.90 Tn. This significant credit expansion resulted in the share of loans and advances within the asset mix increasing to 58.42%, up from 49.63% in FY2024.

To fund this credit growth, the balance sheet was reallocated (as the marginal lending rates were higher than government security rates), leading to a decline in the share of other interest-earning assets to 35.28% from 42.92%. Overall earnings productivity of the balance sheet enhanced as the proportion of IEA improved to 93.17%, compared to 91.06% in FY2024. (Refer Table 47 – Interest spread and NIM).

Loans and advances

Gross loans and advances grew by 36.37% reaching Rs. 2.03 Tn. by end FY2025. Net loans and advances followed a similar trajectory, growing by 37.48% to close the year at Rs. 1.90 Tn.

From a product perspective, growth was particularly concentrated in Pawning (81.85%), Leases (74.38%), and Trade Finance (46.67%). However, Term Loans remained the primary driver of credit expansion, accounting for 57.68% of the total growth and increasing by 35.68% in FY2025.

In terms of sectoral distribution, Wholesale and Retail Trade emerged as the leading contributor, representing 22.62% of the total growth with an individual sector expansion of 39.63%. The Financial Services sector followed, recording the highest relative growth at 117.64% and contributing 14.20% to the overall increase in the loan book. This surge was largely catalysed by the resumption of motor vehicle imports, with the Bank indirectly facilitating market demand through increased lending to Non-Banking Financial Institutions (NBFIs).

Lending to overseas entities recorded a substantial increase during the year. Excluding the credit volumes attributed to the Bangladesh operation, offshore lending book more than doubled, growing by 132.22% to reach Rs. 114.83 Bn. The loan book in Bangladesh recorded a growth of 12.79% in local currency (Taka) terms, moderating from the 15.00% expansion reported in the prior year. This deceleration reflects a deliberate and cautious strategic stance adopted by the Bank in response to the prevailing economic and political uncertainties in the country.

The sectoral and product-wise composition of this growth is illustrated in Graphs 14 and 15 which highlight the diversified yet strategically aligned expansion of the Bank’s loan portfolio during the year.

Further details on the product and sector-wise distribution of loans to customers are available on Financial assets.

Credit quality

During the year, the Bank recorded a marked improvement in asset quality metrics. Despite a 36.37% expansion in the gross loan book, the Stage 3 loan balance remained stable, increasing by only 0.57% in FY2025. Consequently, the Gross Stage 3 Loan Ratio improved to 6.34%, from 8.59% in FY2024.

A strategic focus on de-risking the balance sheet led to an increase in the Impairment (stage 3) to stage 3 loan ratio (inclusive of undrawn commitments) to 73.50%, up from 64.61% in FY2024. This represents the culmination of a five-year upward trend in coverage, which has increased by 42.63 percentage points from the 30.87% recorded in FY2020. This disciplined provisioning resulted in the Net Impaired Stage 3 Loan Ratio declining to 1.54% (FY2024: 2.76%).

Deposits

Reflecting the Bank’s strong deposit franchise, total deposits grew by 16.65% in FY2025 to Rs. 2.60 Tn. from Rs. 2.23 Tn. in FY2024. This performance led to a further expansion of the Bank’s market share within the domestic banking sector. A key driver of this growth was the significant outperformance of CASA deposits, which recorded a growth of 21.51% in FY2025. Consequently, the CASA ratio improved by 159 bps to reach 39.65% (2024: 38.07%), remaining substantially higher than the industry average of 31.57%.

This superior CASA mix was instrumental in optimising the Bank’s funding costs. The high proportion of low-cost deposits directly underpinned the improvement in the Cost of Funds (which declined by 59 bps) and the NIM. (Table 47).

In terms of currency composition, Rupee-denominated deposits expanded by 16.37%, while foreign currency deposits grew at a slightly higher pace of 17.33%. Notably, US Dollar-denominated deposits grew by 16.13% in USD terms, while the Rupee value of these deposits surged by 22.87%.

Capital

Guided by its Internal Capital Adequacy Assessment Process (ICAAP), Capital Augmentation Plan, and Board-approved dividend policy, the Bank maintains capital levels aligned with both current and projected business requirements. As of end-FY2025, the Tier 1 and Total Capital ratios stood at 13.035% (end-FY2024: 14.227%) and 16.698% (end-FY2024: 18.142%), respectively. While both ratios remained well above regulatory minimums of 10% and 14% respectively, they recorded a year-on-year decline primarily due to rapid credit expansion.

Internally generated profits increased Tier1 ratio by 3.231%. However, this was offset by a 29.98% surge in Risk-Weighted Assets (RWA)-driven by robust credit growth-which consumed 3.554% of capital (Refer Graph 16 below). Because more than 60% of net credit growth occurred in the second half of the year, the full interest income cycle from these disbursements has not yet fully accrued to retained earnings, resulting in net capital consumption of 0.323% from operations. Additionally, the dividend cash outlay, including the associated tax impact of the scrip dividend, utilised a further 0.757% of the capital base.

The Bank successfully concluded the issuance of a Rs 15 Bn. Tier II Green Bond during the year. This initiative, alongside other Tier II components, resulted in a 21.63% improvement in total Tier II capital. Despite this enhancement, the substantial growth in RWA led to a moderation of the Total Capital Adequacy Ratio to 16.698%, compared to 18.142% recorded in FY2024.

Liquidity

Despite the accelerated credit expansion, the Bank maintained a robust liquidity position and a stable funding profile. Liquidity Coverage Ratios (LCR) for both Rupee and All Currency remained comfortably above the regulatory minimum of 100%, concluding the year at 419.40% and 288.58%, respectively.

The Rupee LCR moderated from 529.20% in FY2024, driven by the shift of liquid assets to fund high-yielding credit growth and due to the growth in deposits. The All Currency LCR recorded a more pronounced decline from 454.36%, as the shift in liquid dollar assets to fund the increase in off-shore lending, further added to the drop in liquid assets. This realignment of the liquid asset buffer, coupled with the aggregate growth in multi-currency deposits, were the primary drivers of the year-on-year movement.

Long-term structural liquidity remained healthy, with the Net Stable Funding Ratio (NSFR) standing at 163.94% at year-end, representing a 1.6x coverage of the regulatory minimum. The ratio declined from 187.29% as the surge in loans and advances outpaced deposit growth, causing Required Stable Funding (RSF) to increase at a faster pace than Available Stable Funding (ASF).

Reflecting this dynamic, the Advances-to-Deposit (AD) Ratio increased to 77.73% from 66.48% in FY2024. This transition was driven by the gross loan book expanding at more than double the pace of deposits – 36.37% vs. 16.65%. While this indicates a higher utilisation of the Bank’s deposit franchise, the significant LCR and NSFR buffers ensure the Bank remains well-positioned to meet its obligations while continuing to support the domestic economic recovery.

Core Financial Soundness Indicators (FSIs) – Bank Table – 50

Financial Soundness Indicator (%)	FY2025	FY2024	FY2023	FY2022	FY2021
Capital adequacy ratios (under Basel III regulations)
Common equity Tier 1 ratio (Current minimum requirement – 8.5%)	13.04	14.23	11.44	11.39	11.92
Tier 1 capital ratio (Current minimum requirement – 10%)	13.04	14.23	11.44	11.39	11.92
Total capital ratio (Current minimum requirement – 14%)	16.70	18.14	15.15	14.66	15.65
Asset quality ratios
Net impaired loans (Stage 3) ratio (Based on existing regulatory provisions which includes undrawn commitments)	1.54	2.76	5.85	5.25	3.85
Impairment (Stage 3) to Stage 3 loans ratio (Based on existing regulatory provisions which includes undrawn commitments)	73.50	64.61	43.22	39.60	42.76
Total impairment coverage ratio	6.13	6.89	7.05	7.32	5.94
Cost of credit risk (Impairment charges on loans and advances to other customers to average gross loans and advances)	1.29	1.66	0.46	1.91	1.44
Non-performing credit facilities (NPCFs) – [net of impairment] to equity	9.67	15.63	37.38	33.56	26.69
Open credit exposure ratio (Net exposure on NPCFs as a % of regulatory capital)	9.17	15.06	38.69	34.41	25.33
Earnings and profitability ratios
Net interest income to total operating income*	74.06	78.31	70.59	61.70	70.91
Net fee and commission income to total operating income*	14.94	15.40	18.31	14.71	12.90
Other income to total operating income*	11.00	6.29	11.10	23.59	16.20
Operating expenses to gross income*	15.39	15.91	12.71	12.70	17.99
Impairment charge to total operating income*	12.23	19.07	32.48	53.64	26.80
Cost to income ratio (including taxes on financial services)*	39.20	42.00	40.44	29.31	38.08
Cost to income ratio (excluding taxes on financial services)*	29.66	33.94	36.22	26.37	31.71
Financial intermediation margin (Gross income to average assets)*	11.73	11.62	13.40	12.57	8.72
Interest margin (Net interest income to average assets)	4.51	4.27	3.32	3.74	3.51
Return on assets (ROA) – before income tax*	2.96	2.12	1.27	1.03	1.74
Return on assets (ROA) – after income tax*	1.93	1.51	0.82	1.05	1.28
Return on equity (ROE)*	19.51	16.57	9.78	12.46	14.66
Liquidity ratios
Liquidity coverage ratio (LCR) – Rupee – (Current minimum requirement – 100%)	419.40	529.20	491.61	405.91	425.97
Liquidity coverage ratio (LCR) – All currency – (Current minimum requirement – 100%)	288.58	454.36	516.27	293.91	242.52
Net stable funding ratio (NSFR) – (Current minimum requirement – 100%)	163.94	187.29	193.70	173.58	157.47
CASA ratio (Current and Savings deposits as a % of total deposits)	39.65	38.07	39.23	38.36	47.83
Gross loans and advances to deposits ratio	77.73	66.48	60.70	63.71	74.75
Assets and funding structure related ratios
Deposits to gross loans and advances	128.66	150.42	164.75	156.96	133.78
Deposits to total assets	80.08	80.17	80.81	78.92	74.03
Borrowings to total assets	2.69	2.58	1.91	3.20	3.64
Equity to total assets	9.95	9.87	8.33	8.40	8.46

*2024 figures are normalised for the effect of SLISB restructure