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The Consolidated Group profit after tax of the DFCC Bank increased 32% to Rs. 1,131 million for the financial year ended March 31, 2003, up from Rs. 857 million as at March 31, 2002. It was the first time that the bank was able to cross the billion rupee threshold in its profits, the bank said yesterday.

Nihal Fonseka, Chief Executive/Director attributed the success to improved asset growth, significant upgrading in the quality of the loan portfolio and breakthroughs in resource mobilisation.

These planned measures, coupled with the removal of the surcharge on income tax, yielded a post tax profit for the bank, excluding undistributed profits of subsidiaries and associates of Rs. 856 million, an increase of 36%.

Fonseka said that as a major development bank, the DFCC Bank continued to build on its strategy of broadening its horizons that will, in time to come, provide a broad spectrum of financial services demanded by the customers while strengthening its core competencies in development banking, Fonseka said in the company's annual report released yesterday. Gross approvals of facilities during the year under review totalled Rs. 11,699 million, compared to Rs. 11,105 million in the previous year. Disbursements, which lag approvals amounted to Rs. 8,803 million, an increase of 52% over the previous year, largely assisted by the improved business climate.

While aggressively seeking new business, the bank paid close attention to strengthening its capabilities in the restructuring and rehabilitation of sick projects and where deemed necessary, the transfer of assets of failed projects to new investors. As a result, non-performing loans (NPL) decreased from Rs. 3,096 million to Rs. 2,613 million and the NPL ratio improved from 17.2% to 13.4%. The resurgence of the Colombo Stock Exchange (CSE) driven by the ongoing peace process, proved conducive to new equity issues, the most notable being the IPO of the SLT in which DFCC Bank played the role of Manager and Joint Financial Advisor.

The active stock market conditions also enabled the bank to continue its strategy of selectively divesting its equity portfolio to realise Rs. 53 million in capital gains. The SL AA rated bank, which launched several successful projects last year including the expansion of branch network, is poised to continue as a single product development finance institution, an obsolete model of the post war era that has lost its relevance today, Fonseka said.

"The bank needs to complement its core businesses of project finance and SME lending with commercial banking products demanded by its broad base of customers." DFCC Bank is moving away from its development role and has been actively fostering the SME sector over the past two decades.

Around 2,800 SMEs obtained loans totalling over Rs. 5,400 million during the year under review. "The bank's current exposure to this sector is around Rs. 9,300 million through 7,300 enterprises providing over 35,000 sustainable jobs."

DFCC Bank sees opportunities in the financing of infrastructure projects and services, particularly in sectors such as power generation, information and communications technology and SME development."We also anticipate a role in the reconstruction and rehabilitation efforts in the North and East if there is sustained peace.

The Sectoral Analysis (See graph)

1. Agriculture, forestry and fishing

2. Mining and quarrying

3. Manufacture of food, beverage and tobacco

4. Manufacture of textiles

5. Manufacture of wearing apparel excluding footwear

6. Manufacture of leather and leather products including footwear

7. Wood and manufacture of wood products

8. Manufacture of paper products, printing, publishing and packaging

9. Manufacture of chemicals and chemical products other than rubber and plastic products

10. Manufacture of rubber products

11. Manufacture of plastic products

12. Manufacture of non-metallic mineral products including pottery, china and glass

13. Basic metal production

14. Manufacture of fabricated metal products, machinery and equipment including electrical items, transport equipment and instruments

15. Electricity, gas and water industries

16. Construction industries

17. Trade

18. Hotel and restaurants

19. Transport, storage and communication

20. Financing, insurance, real estate and business services

21. Community, social and personal services

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