DFCC Bank posts Rs. 1,288 m profit for 1Q 08

The DFCC Bank announced its results for the three months ended June 30, 2008

The non-audited profit of the Bank, its subsidiaries together with the share of associate companies profit before corporate tax and financial services VAT for the three months ended 30 June 2008 (current period) was Rs1,288 million, an increase of 31.7 pc over the Rs978 million in the previous comparable period (April to June 2007).

The financial services value added tax and income tax expense was Rs747 million being 58 pc of this profit and the profit attributable to equity holders after minority interest was Rs. 515 million an increase of 30.4 pc over the comparable period.

The current period included a one off gain of Rs 108 million (after financial services VAT) arising from the sale of shares held as an investment.

Good control was exercised over non-interest expenses of the Bank. DVB continued to incur costs relating to expanding its network and building capacity and infrastructure for the future following a conscious decision that was taken to continue with the expansion strategy, albeit with some modifications. The cost/income ratio for the Bank and DVB combined was 31 pc compared with 36 pc in the previous period.

A legislative change effective from March 2008 further increased the charge for Financial Services Value Added Tax.

The Rs. 141 million incurred for the quarter was Rs 24 million higher than what it would have been on the basis of the previous computation methodology.

Consolidated diluted earnings per share for the current period increased to Rs3.95 from Rs 3.08 in the comparable period.

“Both the Bank and DVB, the commercial banking subsidiary, were cautious in attempting to grow their lending and lease portfolios in the present interest rate regime since the debt servicing capacity of many borrowers, especially those in the SME sector was strained by the combined effects of high inflation and high borrowing costs,” GM/CEO of the Bank Nihal Fonseka said.

The ability to more aggressively grow the credit portfolio without seriously impairing quality will be contingent upon inflation and interest rates reducing significantly. The recent drop in global oil prices, if sustained, may help to achieve this in the coming months.

The Bank invested Rs250 millions in the equally owned joint venture investment bank with Hatton National Bank PLC on 1 July 2008.

The investment comprised the transfer of shares in DFCC Stockbrokers (Pvt) Limited to Acuity Partners (Pvt) Limited, the joint venture investment bank on 1 July 2008, with the balance subscribed in cash.