|
|
 |
 |
| Sunday, 9 November 2003 |
 |
|
 |
Business |  |
| News Business Features Editorial
|
DFCC profits improve by 16% The non-audited group profit after tax of the DFCC Bank for the first half year of 2003/2004 was Rs. 609 million, an increase of 16 per cent over Rs. 524 million in the corresponding period of last year. The composition of the bank's post-tax profit is given in the table. The bank's borrowing customers benefited from the sharp reduction in interest rates. Consequent reduction in income however was compensated by changes in the liability and asset product mix. The liability product mix change was brought about by the successful implementation of a strategy to increase customer deposits costing less than the cost of borrowings from other domestic financial intermediaries. The asset product mix changed due to a high year-on-year growth in finance leases that yield a higher margin. These proactive management strategies in the context of falling interest rates enabled the bank to increase its net interest income by 36 per cent to Rs. 753 million, compared to Rs. 553 million in the six months period upto September 30, 2002, DFCC's General Manager and Chief Executive Officer Nihal Fonseka said in a statement. Other income of Rs. 278 million increased by 13 per cent from Rs. 245 million in the previous year. Operating profit before provisions was Rs. 779 million, an increase of 35 per cent over Rs. 578 million in the previous comparable period. The cumulative gross specific provision charged to income for the six months was Rs. 215 million, which was 34 per cent higher than the Rs. 161 million charged in the previous year. This includes additional provisions made by the bank over and above the minimum required under the direction issued by the Central Bank of Sri Lanka. In making this provision, the bank has also taken into account the continuing difficulties and delays experienced in debt recovery and the direction issued by the Central Bank in August 2003 amending the basis for computing the mandatory minimum provisions to be effective from January 11, 2004. This amendment requires the forced sale value of immovable property mortgaged as security for non-performing loans to be discounted by a percentage when the age of the arrears of the loan is six months or more. This discount is initially 25 per cent increasing to a maximum of 60 per cent when the loan is in arrears for 54 months or more. Loan portfolio The profit before tax of Rs. 799 million is a 12 per cent increase over Rs. 715 million in the previous comparable period. The current period however bears an additional expense of Rs. 49 million as Value Added Tax introduced on January 1, 2003. The gross loan portfolio on September 30, 2003 was Rs. 19,860 million. The increase of Rs. 1,138 million when compared with the closing position of the previous comparable period was six per cent. The gross financial lease portfolio recorded a year-on-year growth of 55 per cent on a base of Rs. 1,998 million on September 30, 2002, the statement said. Although the gross loan portfolio increased by six per cent on September 30, 2003 compared to September 30, 2002, the gross loan portfolio increase in the current period of six months to September 30, 2003 was only 1.8 per cent. This was mainly due to the time lag in disbursement of some large project loans in the power generation, telecommunication, food and beverages sectors. The gross approval for six months to September 30, 2003 was Rs. 9,514 million compared to Rs. 5671 million for the comparable previous period. This is a 68 per cent increase and demonstrates a stronger demand for credit stimulated by improved economic conditions and investor confidence. The total of loans and leases approved, but not disbursed as at September 30, 2003 amounted to Rs. 7574 million and this augurs well for future portfolio growth. Off-shore banking The bank acquired 90 per cent of National Mercantile Bank Ltd, a licensed commercial bank, an authorised dealer in foreign exchange with a licence to operate a foreign currency banking unit (off-shore banking) on July 31, 2003. The cost of the initial investment was Rs. 59.6 million. Subsequently, on August 28 the bank was allotted, in addition to its rights entitlement of two shares for each one held, additional shares, thereby increasing its ownership to 94.2 per cent. The total investment is Rs. 541 million. National Mercantile Bank was renamed DFCC Vardhana Bank Ltd., on October 20, to reflect its affiliation to DFCC Bank. Since the financial year of DFCC Vardhana Bank ends on December 31, the results of this subsidiary will be consolidated with DFCC Bank with a three-month lag, as in the case of DFCC Stockbrokers (Pvt) Ltd, another subsidiary and Commercial Bank of Ceylon Ltd, an associate company. The goodwill on the initial acquisition of 90 per cent of DFCC Vardhana Bank was Rs. 263 million and this will be amortised in 60 equal months from August 2003. Subsequently, DFCC Bank increased its stake to 94.2 per cent on August 28, 2003 by subscribing to additional rights issue not taken up by some of the minority shareholders. The goodwill on this acquisition was Rs. 20 million and this will be amortised in 60 equal months from September 2003. According to the statement, the post-acquisition loss attributable to DFCC Bank upto end September 2003 was Rs. 16 million and this together with the aforesaid amortisation of goodwill aggregating to Rs. 9 million will be consolidated with the results of DFCC Bank in the next quarter. DFCC Vardhana Bank will shortly open four branches in Colombo, Kandy, Kurunegala and Matara. The Colombo Branch will be located at DFCC's Head Office while other branches will be located in the branch offices of DFCC Bank. By sharing human, technological and infrastructure resources with DFCC Bank, the incremental cost of the branch opening and business acquisition costs of DFCC Vardhana Bank Ltd. would be lower than what would be applicable to a stand-alone commercial bank. DFCC Bank will then be able to offer a full range of asset and liability products as well as foreign exchange and payment services on competitive terms to its customers generating additional revenue from its customer base. |
|
News | Business | Features
| Editorial | Security Produced by Lake House |
