DFCC Bank reported a profit before tax of Rs. 4,233 million and a profit after tax of Rs. 2,768 million for the year ended December 31, 2018 compared to a profit before tax of Rs. 5,792 million and a profit after tax of Rs. 4,415 million in the corresponding period of the previous year.
However, the profit for 2018 includes the one-off fair value loss on Commercial Bank shares transferred to the trading portfolio and the Debt Repayment Levy (DRL) imposed on the value addition on financial services in the current year while the profit for 2017 includes a gain from the sale of Commercial Bank shares.
Therefore, when the loss and gain on account of Commercial Bank shares and the DRL are eliminated for an equitable comparison, the resultant profit after tax would be Rs. 3,851 million for 2018 and Rs. 3,498 million for 2017. The 2018 performance represents a profit growth of 10% over that in 2017.
The Group recorded a profit before tax of Rs. 4,676 million and a profit after tax of Rs. 3,070 million for the year ended December 31, 2018 compared to Rs. 5,891 million and Rs. 4,434 million in 2017. All members of the DFCC Group made positive and improved contributions to this performance.
Following a judicious growth strategy which took into consideration the challenging environment faced by the country, DFCC recorded a year-on-year growth of 17% in its net portfolio which when coupled with prudent management of asset and liability pricing, enabled the Bank to post an increase of 9% in Net Interest Income to Rs. 12,414 million from Rs. 11,342 million in the previous year.
The interest margin decreased slightly to 3.5% from 3.6% in 2017. This performance is creditable given the stringent non-recognition of interest income on credit impaired loans. A growth of 26% was recorded in fees and commission income to Rs. 2,013 million from Rs. 1,591 million in December 2017. This is the outcome of a focus on non-funded business.
As part of its growth strategy, DFCC continuously invests in its organisation and infrastructure. The Bank increased its islandwide footprint by extending the branch network and added ten full service branches during the year.
At the same time, DFCC enhanced its delivery channels through IT system upgrades and the introduction of pioneering, digitally enabled products.
The Bank also continued to invest in its brand and franchise, which supported the increase in its deposit and asset base. The outlay on these investments resulted in a moderate increase of 14% in operating expenses to Rs. 6,672 million from Rs. 5,870 million in the previous year.
DFCC’s deposit base experienced a growth of 25%, an increase of Rs 48,930 million to Rs 242,238 million from Rs. 193,308 million as at December 31, 2017. With this deposit growth the Bank reported improved loans to deposit ratio of 103% from 110% in December 2017.
The Bank’s CASA ratio, which represents the proportion of low cost deposits in the total deposits of the Bank, was 21.8% as at December 31, 2018. Funding costs for DFCC were also contained due to access to medium to long term concessionary credit lines. When these concessionary term borrowings are added to deposits, the ratio improved to 28.6% as at December 31, 2018.
The Bank has consistently maintained a capital ratio above the Basel III minimum capital requirements. As at December 31, 2018, the Group’s Tier 1 capital adequacy ratio stood at 10.888% while the total capital adequacy ratio was 16.168%. On a solo basis, as at December 31, 2018, DFCC recorded Tier 1 and total capital adequacy ratios of 10.766% and 16.065%. These ratios are well above the minimum regulatory requirements of 8.5% and 12.5% effective 2019.