DFCC ups profits

The non-audited group profit after tax, attributable to equity holders of DFCC Bank, for the three months ended 30 June 2007 (current period) was Rs. 425 million, an increase of 8.6 per cent over the Rs. 391 million in the previous comparable period (April to June 2006).

The profit before Value Added Tax and Income Tax expense was Rs. 459 million in the current period recorded a decrease of 11 percent compared to Rs. 513 million in the comparable period.

Absence of growth in Net Interest Income (NII) and higher provisions including the mandatory general provisioning introduced in October 2006 were the main reasons for this decline General Manager and Chief Executive Officer, Nihal Fonseka in a release said.

The gross interest income on loans and advances of Rs 1755 million in the current period was 49 per cent higher than the Rs 1,179 million in the comparable period in the backdrop of a 25 per cent increase in loans and advances, net of provisions by Rs. 9,237 million during the one year period to 30 June 2007. However, this did not translate to an increase in NII, which was static.

The Bank had to resort to a significantly higher level of short-term wholesale customer deposits towards the end of the previous financial year and during the current quarter to meet the increased credit demand and also to fund its investment of Rs 1,603 million in the Rights issue of CBC.

This was a conscious decision taken to ensure a short-term liquidity cushion during April and May 2007 and to avoid dependence on the overnight inter-bank market in the run up to the infusion of new equity. Customer Deposits recorded a year on year growth of Rs 7,217 million (142 pc).

The interest rate and market liquidity volatility that prevailed enabled institutional wholesale depositors to command very high short-term deposit interest rates.