DFCC Bank reports strong 1Q amid higher margins

Despite adverse market conditions, DFCC Bank PLC delivered strong March quarter (1Q23) results on the back of fattened margins amid the sharp rise in interest rates.
The banking group recorded earnings of Rs.4.97 per share or Rs.2.01 billion for the quarter under review compared to earnings of Rs.1.49 per share or Rs.486 million in the corresponding period of the previous year. The banking group’s net interest income rose 75 percent year-on-year (YoY) to Rs.8.37 billion.

The interest margin increased from 3.80 percent in March 2022 to 5.93 percent by March 2023.
“While the higher interest rates may have continued to depress the lending portfolio, it led to an overall improvement in Net Interest income (NII). Strategically, the bank increased the fixed income investment portfolio, which contributed significantly to an increase in investment interest income,” the bank said in a press release. 

The net fee and commission income rose 66 percent YoY to Rs.1.06 billion, supported by increased remittances, trade-related commissions and other fee income lines and fee income generated by credit cards. The bank’s impaired loan (stage 3) ratio increased from 4.36 percent in December 2022 to 4.80 percent as of 31 March 2023. 
The bank saw its impairment charge for the quarter under review increasing by 67 percent YoY to Rs.4.69 billion.
Meanwhile, the bank said due to the application of hedge accounting, the impact on the bank’s equity due to the exchange fluctuation was minimised. 

“A fair value gain of Rs. 2,034 million was recorded on account of equity securities outstanding as at 31 March 2023. The increase in the share price of Commercial Bank of Ceylon PLC during the period was the main contributor to the reported fair value gain in equity securities. The favourable movement in treasury bills and bonds yields resulted in a fair value gain of Rs. 908 million during the period,” the bank said. Despite the challenges faced by the economy and the banking sector, DFCC Bank’s total assets increased by Rs. 9.8 billion, recording a growth of 1.75 percent from December 2022. 

“With increased provisions for expected credit losses and appreciation of the Sri Lanka Rupee, the net loan portfolio has recorded Rs. 357 billion as at 31 March 2023,” the bank said.
The bank’s deposit base experienced a growth of 2.29 percent during the quarter under review. 
As at 31 March 2023, DFCC Bank maintained all
its capital adequacy ratios above the minimum regulatory requirement.