DFCC Bank March quarter profit up on better margins

The DFCC Bank PLC group reported a net profit of Rs.1.36 billion or Rs.5.13 a share for its January – March quarter, gaining 42.5 percent from the corresponding quarter last year as the bank appears to have managed to expand its margins under the rising interest rate scenario but the loans have barely grown, the interim results released by the 
bank showed. 
The provisions against possible bad loans also fell significantly giving a boost to the bottom line. 
The net interest income rose by 44.4 percent to Rs.2.59 billion and the fee and commission incomes also grew by 12.4 percent to Rs.342.9 million from a year ago. The net interest margin was stretched to 3.6 percent from 3.3 percent in December 2016. The bank appears to have repriced its existing loan portfolio in line with the rising interest rates and the bank may have also received higher yield from its gilt-edged investments.
The bank has Rs.46.3 billion in available-for-sale assets, which are in equities and government securities.  
The loans and receivables grew by only Rs.1.4 billion or 0.73 percent during the quarter.  
DFCC Bank had predominantly been a project lender but now has a higher focus on consumer lending. DFCC Bank in 2015 absorbed its commercial banking subsidiary, DFCC Vardhana Bank PLC after the proposed merger between DFCC Bank PLC and NDB Bank PLC was abandoned.  
Meanwhile, the bank’s specific provisions fell to Rs.211.4 million during the quarter under review from Rs.476.8 million reported for the corresponding period last year. However, the gross non-performing loan ratio rose to 3.34 percent from 2.97 percent three months ago.  
The bank’s deposits base grew by Rs.3.1 billion due to the foreign currency deposit/s but the rupee deposits fell.   
The low-cost deposits measured by the current and savings account (CASA) ratio, slipped to 18 percent from 20 percent in 2016. 
The bank’s trading book made a gain of Rs.31 million while the marked-to-market losses of its available-for-sale investments declined to Rs.1.69 billion from Rs.2.77 billion a year ago due to positive gains from equity and gilt investments, the bank said in an earnings release. 
Both Tier I and Tier II capital adequacy ratios stood at 12.98 percent and 16.39 percent levels, respectively, significantly above the regulatory minimums of 5.0 percent and 
10.0 percent. 
As of March 31, 2017, the government collectively held a 33.54 percent stake in DFCC Bank via Bank of Ceylon, Sri Lanka Insurance Corporation and the Employees’ Provident Fund. 
HNB held a 12.22 percent stake in DFCC Bank being the second 
largest shareholder.