DFCC Vardhana Bank PAT up by 92.5%

DFCC Vardhana Bank’s profit before tax (PBT) amounted to Rs. 708.5 million during 2011 recording an increase of 31.5% compared with the PBT of Rs. 538.8 million in 2010. The provision for taxation amounted to Rs. 177 million.

The effective tax rate was 24% of PBT down from 51% in 2010. Profit after taxation (PAT) attributable to the shareholders amounted to Rs. 531.4 million reflecting an increase of 92.5% over the PAT of Rs. 276 million over the previous year. The earnings per share (EPS) increased by 73.3% to Rs. 2.6 in 2011 from Rs. 1.50 in 2010 while the return on assets (ROA) was 1.4% up from 0.9% in 2010.

In terms of asset growth and profit generation during the year, DVB delivered a sound financial performance. Total assets increased by 55.6% to Rs. 45,940 million as at 31 December 2011. This growth was driven by the increase in loans and advances. The favourable macro-economic conditions and positive investment sentiments supported the rapid increase in loans and advances. Interest income from loans and investments amounted to Rs. 3,733 million showing an increase of 10.8%, despite low interest rates, benefiting from the balance sheet growth. The income streams have begun to be diversified with the addition of pawning advances, housing loans, financial leases, credit card advances and other PFS products.

Credit operations: DVB’s lending operations resulted in increasing loans and advances to Rs. 33,282 million from the loan book balance of Rs. 19,424 million at the end of 2010. This represents a lending growth of 71.3% widely surpassing the 31.9% average credit growth in the banking sector.

Corporate banking: During the year, new credit limits for Rs. 6,839 million were approved enabling the corporate banking facilities to grow by 54% from Rs. 12,668 million to Rs. 19,507 million. This was matched by a 94% increase in the utilisation of these credit limits from Rs. 5,490 million to Rs. 10,629 million and an 88.5% growth in advances from Rs. 3,349 million to Rs. 6,314 million.

Personal Financial Services: An increase of the PFS portfolio to Rs. 4.2 billion from a relatively small base of Rs. 0.9 billion a year ago not only demonstrates a high growth rate, albeit from a small base, showing that DVB has right strategies and structures in place to sustain the growth momentum created in 2011.

Deposits: Total customer deposits expanded to Rs. 33,587 million as at 31 December 2011 from Rs. 23,496 million a year before recording an absolute growth of Rs. 10,091 million or a 43% increase. In comparison, the savings deposits grew by Rs. 1,839 million or 34% to Rs. 7,251 million from Rs. 5,412 million. The saving deposits constitute 21.6% of the customer deposit portfolio while focus of savings deposit promotion remains to be the growth in the proportion of savings deposits. The public deposits continued to be the main funding source and constituted 73% of all sources of finance including the equity capital. The deposit growth rates exceeded the banking sector average growth rate of 15% for the year.

Issue of Listed Subordinated Debentures: DVB raised Rs. 1,000 million from a five year unsecured and subordinated debentures issue with fixed and floating rate options. The debentures increased the Tier 2 capital by 280 basis points as at 31 December 2011. Apart from the diversification of the borrowing sources, these funding supported term lending such as financial leases, housing loans and similar term loan products. The debentures were subsequently listed on the CSE providing them with better market liquidity.

Rights Issue of Shares: DVB increased the Stated Capital by Rs. 1,105 million through a rights issue of 36,837,739 ordinary shares at Rs. 30 per share, increasing total stated capital to Rs. 3,183 million divided into 221,026,586 shares.