ECONOMYNEXT – Sri Lanka’s DFCC Bank has reported profits of 1.7 billion rupees for the December 2022 quarter, up from 251 million rupees last year, helped by higher interest margins, despite higher provisioning in tight economic conditions.
The DFCC group reported earnings of 4.64 rupees per share for the quarter, up from 3.64 rupees last year. For the year to December DFCC reported earnings of 7.88 rupees per share down from 11.17 percent a year ago.
Fee and commission income rose 43 percent to 1.09 billion rupees.
Interest income for the quarter grew 128 percent to 22.6 billion rupees, up from 9.9 billion, while interest expenses grew 152 percent to 15.1 billion up from 6.0 billion rupees, allowing the bank to grow net interest income 90 percent to 7.5 billion rupees.
The group said it provided 3.8 billion rupees for bad loans for the quarter.
Sri Lanka’s market interest rates rose sharply after March 2022 as corrective measures were applied after the currency collapsed from 200 to 360 to the US dollars after two years money printed to mis-target rates led to a loss of forex reserves and external sovereign default.
For the full year loan growth was contained at 1 percent to 369 billion rupees. The bank reduced its foreign currency lending portfolio, though rupee values were higher after the currency collapse.
The banks Stage 3 impaired loans ration had risen to 4.36 percent by end December 2021 from 3.03 percent a year ago.
DFCC said it had made “adequate impairment provisions during the year by introducing changes to internal models to cover unseen risk factors in the present highly uncertain and volatile environment.”
Amid uncertainties over how debt re-structuring would proceed, the bank said it had used its “discretion and informed judgement to estimate a recovery value and had decided on a impairment provision of 35 percent on sovereign debt investments.
The higher rates in addition to contributing to bad loans, also leads to mark to market losses. Sri Lanka’s accounting body has given forbearance to banks.
The fair value of re-classified assets was 16.07 billion rupees and the fair value loss was 4.5 billion rupees.
At bank level DFCC had a Tier 1 capital of 10.08 percent and total capital adequacy of 13.1 percent, above the minimum requirement of 12.5 percent. (Colombo/Feb19/2023)