DFCC off to a strong start in 2017

For the first quarter ended 31 March 2017, the DFCC Group reported a consolidated profit after tax of Rs. 1.37 billion, which is a growth of 42% over Rs. 970 million in the comparable period of the previous year and a growth of 77% over the Rs. 777 million in the previous quarter.

The bank recorded a 65% growth in profit before tax to Rs. 1,692 million year-on-year from Rs. 1,029 million and 45% growth in profit after tax to Rs. 1,339 million from Rs. 926 million. 

DFCC in a statement said due to the timely re-pricing of assets and liabilities the interest margins improved to 3.6% from 3.3% during the previous quarter, which contributed towards augmenting net interest income. 

Net interest income grew by 44% to Rs. 2,581 million from Rs. 1,788 million while net fee and commission income increased by 16% to Rs. 343 million from Rs. 296 million due to successful strategies adopted by the bank in service delivery.

Furthermore, DFCC Bank continues to be one of the best capitalised banks in the country. The bank’s Tier 1 and total capital adequacy ratios were 12.98% and 16.39% respectively as at 31 March 2017, which are well above the regulatory stipulated levels.

Commenting on DFCC Bank’s financial results, CEO Arjun Fernando said: “Whilst the first quarter results indicate an improvement to the comparable period of last year, we are forging ahead with new initiatives to reach greater milestones in 2017. Whilst planning our growth strategy we have set into motion an array of financially prudent measures, customised financial solutions, digitalisation initiatives, branch expansion and other deposit mobilisation schemes to position ourselves in the consumer banking landscape. Delivering sustainable value to all our stakeholders underpins our efforts as we partner our customers on the path to financial growth.”

Net operating income increased by 45% to Rs. 3,316 million from Rs. 2,283 million in the previous comparable period. Operating expenses too inclined upwards during the year primarily due to the branch expansion drive and marketing activities. 

However, DFCC Bank focused on cost containment measures across its structures to enhance efficiencies. The bank was able to maintain its cost to income ratio at 35.5% before NBT, VAT and loan provision, which is amongst the best when compared to the industry.

The bank’s branch expansion strategy has made it possible to penetrate markets across the country to be accessible to more customers. During the quarter, the bank opened eight fully-fledged branches island-wide.

Year-on-year, the bank’s lending portfolio has grown by Rs. 23,616 million to Rs. 187,113 million from Rs. 163,497 million as at 31 March 2016, which is a growth of 14%. During the first quarter 2017, the lending portfolio grew by Rs. 1,328 million from Rs. 185,785 million as at 31 December 2016. 

The bank recorded a non-performing ratio of 3.34% as at 31 March 2017, compared to 2.97% as at 31 December 2016. 

The bank is closely monitoring the credit portfolios and said appropriate action will be taken to reverse this trend.

Reflecting the success of the deposit promotional campaigns and public trust in the bank, the deposit base increased by 22% year-on-year to Rs. 143,625 million. During the first quarter alone, the bank’s total deposit base increased by Rs. 3,110 million, outpacing lending growth. 

However, due to high interest differential in low-cost deposits and term deposits the CASA ratio dropped from 20% to 18% during the quarter.

With the objective of arresting this trend the bank said it initiated several programs in quarter one which will continue during the year to offer many more benefits and rewards to improve the CASA ratio and generate a sustainable deposit base.

The overall performance of the quarter indicates that DFCC Bank is well positioned to serve the nation as a fully-fledged commercial bank through a range of financial services that will promote wealth creation across the country. 

Following its amalgamation with DFCC Vardhana Bank, DFCC Bank is now a fully-fledged commercial bank that offers a range of products and services across customer segments with specialised expertise in development banking. This unique blending of commercial banking and development banking has created greater value and new opportunities whilst enhancing growth and optimising synergies.

The DFCC Group comprises DFCC Bank Plc and its subsidiaries Lanka Industrial Estates Limited, DFCC Consulting Ltd. and Synapsys Ltd., Acuity Partners Ltd, the joint venture company, and National Asset Management Ltd, the associate company.