Vardhana records Rs. 264 mn profit upto September

DFCC Vardhana Bank, the commercial banking arm of the DFCC Bank has recorded an impressive growth of 80% in its deposit base as at end September 2008 compared with the figures reported on the same day of 2007.

This is the highest growth rate achieved by any bank in the country at a time when banks are facing liquidity pressures owing to declining trend in ability to save whilst credit demand has increased as a result of inflation.

Managing Director/ CEO of DFCC Vardhana Bank L.G. Perera is pleased with this achievement in a fiercely competitive market. He elaborated on the bank’s overall performance up to quarter ended September whilst addressing major concerns facing the banking sector including Vardhana Bank.

Although profit before tax and provisions amounting to Rs 493 mn reflected a growth of 70%, profit after the provisions for loan losses amounting to Rs 264 mn showed a growth of only 8% over the previous year.

This was due to higher provisions being made in the financials over and above the regulatory CBSL provisioning guidelines due to more prudent practices adopted by the Bank. This resulted in the provision cover increasing by 10 percentage points from 16% in September ‘07 to 26% in September ‘08.

The net interest Income of DFCC Vardhana Bank for the nine months ended September 30, 2008 amounted to Rs 814.4 mn. This reflects a remarkable growth of 83% over the same comparable period of last year.

Total Interest income increased by 66% to Rs. 2.2 bn for the nine months ended September ‘08, aided by higher interest margin of 5.4% recorded in 2008 from 4% in the third quarter of 2007 in addition to increased loans and advances.

The interest income on interest bearing assets depicted a growth of 247% and stood at Rs. 344mn as at the end of Sep ‘08 compared to Rs. 99mn in 2007. This is due to higher investments in Treasury bills and Bonds in the current year amounting to Rs. 5.08bn in comparison to an investment of Rs. 709 mn in 2007.

Interest costs on customer deposits was Rs. 1.28bn as at end September 2008 compared to Rs. 649 mn in 2007. Total non interest expenses rose from Rs. 354.5mn to Rs. 538 mn in 2008 due to the rapid branch expansion and staff costs related to same.

These branches which are relatively new did not have time to breakeven and contribute to the income stream of the Bank during the first year of operations.