DFCC Bank sees profits surge in 1Q

• Gains seen from sale of G-Secs and lower impairments

DFCC Bank PLC reported some robust financial performance for the three months ended in March 2024, although the core banking performance is yet to contribute meaningfully to the bank’s bottom line.
Releasing its interim report for the January-March quarter, the bank reported earnings of Rs.8.94 a share or Rs.3.79 billion, compared to Rs.4.97 a share or Rs.2.01 billion a year ago.
The profit was mainly supported by the Rs.1.88 billion gains it realised from the disposal of part of its government securities portfolio, which was until then recognised as part of the other comprehensive incomes.
These gains were at a nominal Rs.132.8 million in the year earlier period.
The next largest contributor to the bottom line of the bank was the lower impairments in the current period.
The bank set aside Rs.1.58 billion for possible loans and other losses in the quarter, substantially down from the Rs.4.69 billion provided in the same period in 2023.
The banks are seeing their borrowers’ profiles improving, due to the recovering economy and lower interest rates while they have already provided adequately or more for possible losses on the foreign currency-denominated government securities.
The bank reported a net interest income of Rs.7.06 billion, down 16 percent from the same period in 2023, as the banks were undergoing a period of interest rate adjustment between its assets and liabilities.
The bank’s net interest margin narrowed to 4.48 percent, from 5.18 percent three months ago.
Meanwhile, the fees and other incomes were recorded at Rs.975.05 million for the quarter, down by 8 percent from a year ago.
The bank is seeing the growth for loans coming back but wasn’t just enough to raise the other incomes they generate from such loans.
The bank’s outstanding loan stock rose by a little under 2 percent to Rs.355.3 billion in the quarter while the deposits grew by 7 percent to Rs.435.7 billion.
The bank’s Stage 3 loans ratio fell to 6.97 percent, from 7.03 percent three months ago.
The bank’s share closed at Rs.79.40 a share, slipping 20 cents or 0.25 percent yesterday.
“DFCC Bank has delivered strong financial performance, with profits surging alongside the ongoing economic revival. Despite lower interest margins, our proactive measures in cost control and risk management have sustained our profitability,” said DFCC Director/CEO Thimal Perera.