DFCC posts Group PAT of Rs. 3.2 b, assets increase by 17%.

Friday, 6 June 2014 03:19 - - {{hitsCtrl.values.hits}}

DFCC Bank announced a profit after tax of Rs. 3.2 billion for the group for the year ended 31 March in its annual report which was released this week. Disregarding a one-off tax refund of Rs. 184 million included in the prior year profit after tax at the bank and group levels, the Group posted a commendable PAT of Rs. 3.25 billion under tough market conditions, marginally lower by 4% compared with Rs. 3.39 billion reported in the previous year. However total Group assets grew by 17% to Rs. 177.333 billion. DFCC Bank, the premier development bank of the country, which approaches its sixtieth year, has over the years posted a consistent record of success by judiciously managing its business and expanding through a series of strategic acquisitions, alliances and partnerships. DFCC is one of the largest capitalised companies in the Colombo Stock Exchange valued at Rs. 38.148 billion. Its shares are widely sought and actively traded. Total income comprising of interest income and other income from the DFCC Banking Business (DBB) which includes DFCC Bank and its almost wholly owned subsidiary, by far the largest contributor to profits and asset growth of the Group, was Rs. 20.214 billion, an increase of 13.3% over Rs. 17.837 billion of the previous financial year. Interest income of DBB was up by 14.8% to Rs. 18.467 billion. Focus on long-term financing DFCC’s new Chairman Royle Jansz noted in his message: “DFCC’s governing mandate has always been to provide long term financing to customers, which was unavailable to them elsewhere, to grow their business, not thinking solely about profitability, but of the benefit such businesses would bring to the economy of the country as a whole. This strategy involved more risk than would normally be acceptable to commercial banks in the past, and has sometimes seen us burning our fingers, but has, in the vast majority, provided DFCC with many satisfied and lifelong customers.” Total approvals of project financing facilities comprising term loans, finance leases, investment securities and guarantees grew substantially to Rs. 34.692 billion from Rs. 23.490 billion in the previous year. Of this, total project loan approvals amounted to Rs. 30.107 billion compared to Rs. 16.778 billion in the previous year. Due to the lag effect typically in project financing, the total project financing portfolio grew to Rs. 67.814 billion from Rs. 64.801 billion in the previous year. In readiness to reap full benefits of the anticipated credit growth, especially in long term financing, DFCC raised low cost funds from a mix of multilateral and bilateral agencies, international and domestic markets and debentures. In addition to raising funds from the capital market, DFCC can also if needed unlock and deploy the substantial value of its equity portfolio which includes significant holdings in strong listed financial institutions.

The raising of the $ 100 million five-year funds from the landmark international debt issue based on the strength of the bank’s own balance sheet was a noteworthy achievement. It was the first private bank in the country to do so and is considered a significant feat given the volatility in the debt markets that prevailed at the time. “It is a strong testament to the international investor confidence in the bank and the country alike,” noted the Chairman. Early 2014 DFCC also secured a line of credit for 90 million euros from the European Investment Bank (EIB). These concessionary funds are being deployed in medium to large-scale enterprises especially in the provinces and energy efficiency and renewable energy projects. Based on DFCC’s unparalleled track record of managing multilateral credit lines, the bank was also EIB’s clear choice to be the manager/administrator for the program. Dynamic and enduring The main thrust of DFCC’s medium term strategic plan is to capitalise on financing the direct and spin-off business opportunities arising from the Government’s Five+1 Hub strategy. DFCC’s leadership in key sectors such as green energy and tourism will underpin its capabilities in this respect. “Skills and resources that have been honed over nearly 60 years of project financing will continue to hold us in good stead in our drive to play a great innings,” said Chief Executive Arjun Fernando. With regard to the proposed merger of NDB and DFCC, the CEO stated in his report: “I prefer to view it as the next phase of DFCC’s evolution where the bank progresses to greater heights in a new form that is stronger, more dynamic and more enduring. In fact, consolidation will materialise the full value of DFCC’s constituents; i.e. its investments, customer base, project financing franchise, human capital, IT systems and so on. This process can only benefit all of DFCC’s stakeholders as the outcome will be an entity whose value is greater than the sum of all its individual parts.” Speaking of the year ahead Arjun Fernando noted: “Kick started by good asset growth in the last quarter of 2013/14 coupled with the robust pipeline of requests for funding for new projects and the rolling out of EIB funds to SMEs at concessionary rates will keep project lending activity at a peak throughout the year. Our success with ongoing consultancies in Fiji and the Solomon Islands are opening new doors for international business. Our foray into Bancassurance will add to our palette of services. All of these are exciting prospects. The year ahead looks promising, and the bank is geared to perform.”