DFCC Bank Group profit up 19% to Rs. 3,642 m in nine months

The non-audited profit of DFCC Bank, its subsidiaries together with the share of associate companies profit before corporate tax and financial services VAT for the nine months ended December 31, 2007 (current period) was Rs 3,642 million, an increase of 19 pc over the Rs. 3,051 million in the corresponding period (April to December 2006).

The financial services value added tax and income tax expense was Rs 1,924 million being 53 pc of this profit and the profit attributable to equity holders after minority interest was Rs. 1659 million an increase of 21 pc over the corresponding period.

The consolidated annualised return on equity was 14.7 pc a decrease from the 14.9 pc recorded in the corresponding period. Consolidated diluted earnings per share for the current period increased to Rs 13.25 from Rs 12.37 in the corresponding period.

The gross approvals of DFCC Bank during the current period was Rs 10,412 million being 39 pc lower than Rs 17,130 million in the corresponding period reflecting the lower credit demand for capital asset funding and leases of acceptable credit quality in the high interest rate environment that prevailed.

The Bank was particularly cautious in expanding the fixed rate medium term leases due to credit and market risk concerns and also due to changes to the tax structure introduced in the last budget that affected the profitability of this product.

The undisbursed approved credit on December 31, 2007 was Rs 7,632 million. The combined gross advances of the Bank and its commercial banking subsidiary DFCC Vardhana Bank (DVB) amounted to Rs 58,551 million, a growth of 5 pc during the financial year.

The gross non-performing loans and advances ratio of the Bank declined from 7.3 pc on September 30, to 6.2 pc on December 31, 2007. This is higher than the 4.5 pc on March 31, 2007. However, the portfolio risk level is considered to be acceptable in the context of prevailing high interest rate regime reducing the debt service capacity of borrowers and the developmental role of the Bank with a significant credit exposure to small and medium enterprises in underdeveloped provinces.

The Bank's business model does not expose it to significant market risks and this risk was managed through appropriate pricing strategies.

The Senior long term debt of the Bank continued to be rated AA (lka) by Fitch ratings Lanka.