ECONOMYNEXT – Profits at Sri Lanka’s listed DFCC Bank Plc rose 90 percent from a year earlier to 810.8 million rupees in the September 2018 quarter despite rising provisioning for bad loans on improving interest margins and a one-off gain from equity sales, interim accounts showed.
The banking group reported earnings of 3.06 rupees a share in the quarter. For the nine months to end September 2018, earnings were 9.54 rupees a share on a profit of 2.5 billion rupees, down 26 percent from a year earlier.
DFCC Bank closed 5 rupees higher at 97.60 rupees on Thursday.
In the September quarter, net interest income grew 18 percent from a year earlier to 3.5 billion rupees, as interest income rose 15 percent to 10 billion rupees and interest expenses increased 14 percent to 6.6 billion rupees.
Net interest income growth was achieved by expanding the loan book and re-pricing deposit liabilities, DFCC Bank said.
The bank reported an interest margin of 3.8 percent at end September, up from 3.6 percent nine months earlier.
Net fee and commission income grew 25 percent to 515.5 million rupees.
Net gains from financial instruments surged 359 percent to 2.2 billion rupees on account of gains from the sale of shares of listed Commercial Bank of Ceylon Plc, which was a one-off gain, DFCC Bank said.
The banking group reported a net operating loss of 2.2 billion rupees in the quarter, down from a profit of 445 million rupees a year earlier, due to a 3.8 billion foreign exchange loss in the period, deepening from a loss of 613 million rupees a year earlier.
Bad loans provisioning increased 2 percent from a year earlier to 490.3 million rupees. Non-performing loans were 3.26 percent of total loans, up from 2.77 percent nine months earlier.
The rise in non-performing loans was due to "adverse environmental conditions that prevailed during this time," Lakshman Silva, Chief Executive Officer at DFCC Bank told shareholders in a statement.
"However, recovery processes are being rigorously pursued to minimize any actual losses that may arise from such exposures," he said.
Operating expenses including personnel costs and investments in branch expansions rose 22 percent to 1.7 billion rupees, the banking group said.
DFCC Bank’s loan book expanded 14 percent from nine months earlier to 243.4 billion rupees at end September 2018. Its deposit based grew a faster 19 percent to 230.4 billion rupees.
"The bank’s CASA ratio, which represents low cost deposits over the total deposits of the bank was 20.1 percent at end September 2018," Silva said.
"DFCC bank continues to enjoy medium to long term low cost borrowing lines that helped to reduce the funding cost. When these term borrowings are added to deposits, the ratio improved to 27.7 percent as at 30 September 2018," he said.
DFCC Bank’s Tier 1 capital ratio was 10.36 percent at end September 2018, down from 13.093 percnt nine months earlier but higher than the regulatory minimum of 7.875 percent.
Total capital adequecy was 16.067 percent, higher than the regulatory minimum of 11.875 rupees, but lower than the 16.529 percent achieved nine months earlier. (COLOMBO, 02 November 2018)