DFCC reports solid December profits amid adversities 

DFCC Bank PLC reported some solid profit in the three months to December 2022 (4Q22) riding on the elevated interest rates and fee incomes although the larger provisions, expenses and taxes weighed somewhat. 
The bank with a more development lending focus reported net interest income of Rs.7.52 billion in the three months, up 90 percent from the same period a year ago as the higher margins on the back of higher rates helped the bank’s topline. 

For instance, the bank expanded its net interest margin to 4.96 percent from 2.66 percent in 2021. 
This is despite the growth nearly coming to a standstill as the bank turned more cautious in extending new loans amid the economic upheaval which gripped the nation for 
much of 2022.

“Firstly, the foreign exchange crisis caused by the lingering effects of the pandemic, as tourism had come to a standstill, export earnings dwindled, and inward remittances reduced to a trickle. The second was the devaluation of the Sri Lanka Rupee (SLR) which led to runaway inflation and widespread economic hardship,” the bank said in an earnings release. 
“The third and most important factor was the high interest regime, which impacted the entire economy while the banking sector was particularly hard hit,” it added. 

The bank grew its loan book by just 1 percent in 2022 as it did not pursue aggressive growth in the face of these challenges to prevent any more damage to its asset quality. 
The bank reported a Stage 3 loans ratio, the closest gauge of the non-performing loans of 4.36 percent by the year end from 3.03 percent at the start of the year. 

The deposits grew by 16 percent. Both loans and deposits contained an element of inflated assets and liabilities from the steeper fall in the rupee against the dollar last year. 
The bank reported earnings of Rs.1.73 billion or Rs.4.64 a share for the October – December quarter compared to Rs.230.04 million or Rs.3.64 a share in the year earlier period.
The bank set aside Rs.3.81 billion against possible bad loans and Rs.1.22 billion for other financial assets consisting of foreign currency sovereign debt in the quarter compared to Rs.1.33 billion and Rs.595.38 million in the same period in 2021. 

The bank reported net fee income of Rs. 843.38 million for the quarter, up 27 percent from a year ago. 
Hatton National Bank held 12.47 percent stake in DFCC Bank being the largest shareholder while the government in concert held another 26.43 percent. LOLC Investment Holding Three held 10.0 percent stake being its third largest shareholder.