DFCC Bank posts strong 3Q results | Sunday Observer

DFCC Bank posts strong 3Q results

12 November, 2017
Royle Jansz and Lashman Silva
Royle Jansz and Lashman Silva

DFCC Bank reported strong third quarter results demonstrating positive momentum across business as a rapidly emerging full service commercial bank.

The growth was visible in all its income segments, with a 31% increase in operating income year-on-year. The bank’s net interest income rose by 32%, to Rs. 8,228 million buoyed by improvements to the net interest margin from 3.3% in December 2016 to 3.6% by September 2017. In addition, the bank’s net fee and commission income grew by 17% to Rs. 1,110 million complemented by the growth in business volumes.

The bank augmented its total assets by Rs. 32,568 million (11%) and reported a 31% growth in profit before tax of Rs. 4,341 million and a 35% growth in profit after tax of Rs. 3,418 million, despite a backdrop of higher taxes, volatile interest rates, tight margins and intensifying competition.

The group closed nine months as at end September 2017, with a 24% year-on-year growth in profit before tax of Rs. 4,377 million. Group profit after tax (PAT) for 3Q declined by Rs 525 million against the 3Q of 2016. This is mainly due to the bank’s higher impairment provision and increased cost due to expansion.

However, over the nine month period, the group recorded a consolidated PAT growth of 26% amounting to Rs. 3,391 million.

The DFCC Group comprises DFCC Bank PLC (DFCC), and its subsidiaries - Lanka Industrial Estates Limited (LINDEL), DFCC Consulting (Pvt) Limited (DCPL) and Synapsys Limited (SL), a joint venture company - Acuity Partners (Pvt) Limited (APL) and associate company - National Asset Management Limited (NAMAL).

Anchoring growth firmly on a foundation of good governance, the DFCC Group and DFCC Bank maintained capital adequacy ratios well above minimum requirements under Basel III standards which came into effect from July 2017.

As at 30 September 2017, the group’s Tier 1 capital adequacy ratio stood at 11.83% and the total capital adequacy ratio at 15.49%. DFCC Bank recorded Tier 1 and total capital adequacy ratios of 11.37% and 15.04% respectively, which is well over the minimum regulatory requirements of 7.25% and 11.25%.

DFCC Bank continued to penetrate the market by expanding its branch network to be more accessible to customers. During the nine months ended September 2017, the bank opened twelve fully-fledged branches across the country.

This coupled together with extensive business promotions, new savings products, and investments in IT system modernisations have contributed towards expanding delivery channels and improving service deliverables. The results of these investments are already evidenced in the lending and deposit growth as at end September 2017. The rapid loan portfolio growth to Rs. 202,676 million by end September 2017 was outshone by the 33% (Rs. 46,657 million) year to date deposit growth, which swelled total deposits to Rs. 187,171 million by end September 2017.

The bank’s low cost deposits (CASA) increased by Rs. 5 billion during the 3rd quarter bringing the CASA ratio to 17% from 16% in June 2017. This growth in particular was an outcome from the various initiatives launched by the bank during the year, to grow this segment of deposits.

DFCC bank continues to enjoy medium to long term concessionary credit lines which has helped the bank to maintain low cost of funds. When considering these funding lines and the low cost deposits, the ratio improved to 26.5% in September 2017.

Against this backdrop of asset growth, the bank’s return on assets (ROA) improved to 1.7% by September 2017 from 1.6% in December 2016, while the return on equity (ROE) increased by 17.5% to 8.7%, from 7.4% in December 2016.

Due to the prudent recovery processes implemented and close monitoring, the bank has been able to reduce the NP ratio to 3.24% by September 2017 from 3.34% recorded in March 2017.

Due to investments in people, IT and branch expansion the bank’s operating expenses increased to Rs. 4,190 million. Despite this increase, the bank has been able to maintain a cost to income ratio of 44% (without the exceptional gain).

Upholding its commitment as a crucial partner for the exporter community in Sri Lanka, the bank stepped forward to support the Colombo International Tea Convention held in August 2017, as a Strategic Partner.

By partnering such a key event the bank added value and growth opportunities for businesses in the Tea Industry.

DFCC Bank also believes that staff plays an important role as ambassadors. Therefore, during the quarter, in order to further reinforce the bank’s vision, mission and values and engage with its growing workforce, an internal campaign was launched updating the look and language of the values.

Lakshman Silva took over as the CEO from Arjun Fernando on 16 August 2017. Silva who was the driving force behind the amazing success of DFCC Vardhana Bank in a short period of time, will use his acumen and experience to drive the bank’s commercial banking business while continuing to promote and encourage project financing services, using expertise that DFCC has honed over six decades as one of the premier development banks in Asia. 

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