DFCC posts Rs. 1.2 b PAT in 2Q

The DFCC Group posted a consolidated profit after tax of Rs 1,239 million for the second quarter ended September 30, 2013 compared with Rs 1,428 million in the corresponding period of the previous year.

Apart from the banking business which contributed Rs 1,117 million to profit after tax, the investment banking joint venture, Acuity Partners (Pvt) Limited (APL) contributed Rs 66 million during this period (Rs 6 million in the corresponding period of the previous year). The contribution from all other subsidiaries and associate company collectively was Rs 56 million. (Rs 77 million in the corresponding period).

The banking business of the DFCC Group is undertaken by DFCC Bank (DFCC), a licensed specialised bank and 99% owned subsidiary DFCC Vardhana Bank (DVB), a licensed commercial bank.

Both banks function as one economic entity and it is appropriate to analyse the consolidated performance of the two banks as DFCC Banking Business (DBB). A consolidated Income statement for DBB has been released to the Colombo Stock Exchange as supplementary financial information. This statement was derived from the interim financial statements. Since the financial year of DVB ends in December, the accounts of DVB are consolidated with a three-month lag.

Net Interest Income (NII) of DBB increased by 24% from Rs 3,303 million to Rs 4,092 million although total loans and advances (net of accrued interest) only increased by 8.7% year-on-year to Rs 108,223 million as at September 30, 2013.

The reported NII does not include the cost of hedging exchange rate risk arising from funding swaps where the DBB swaps foreign currency to Rupees to fund Rupee assets as part of its funding strategy.

The foreign exchange loss of Rs 358 million reported under 'other' operating income is net of the cost arising from funding swaps of Rs 373 million. The revised foreign exchange gain after adjusting for the swap cost amounts to Rs 15 million.

The forward exchange contracts are accounted as a derivative and its fair value changes are reported as 'net gain' (loss) from financial instruments at fair value through profit or 'loss' in the income statement.

The net fee and commission income of DBB was Rs 373 million an increase of 15% compared to Rs 325 million in the corresponding period.

Total charge for impairment of loans and other losses was Rs 657 million, a 25% increase compared to Rs 527 million in the corresponding period. The charge in both periods included interest on impaired loans recognised on accrual basis as interest income and hence in NII.