DFCC profits up 18 % for 6-mth period
DFCC Bank un-audited post-tax profits for the six months to September 30 rose to Rs 796 million, up 18 percent over the Rs 673 million in the previous comparable period, the bank said.
It said due to changes to accounting statements that came into effect during this financial year, DFCC Bank’s own financial statements account for its investments in subsidiaries and associate companies at cost. “Thus, these investments, which hitherto were accounted under equity method of accounting, have been restated with corresponding adjustments to the retained profit and reserves of the bank,” the statement said.
The profit before VAT and Income Tax expense was Rs1.0 billion in the current period, up 35 percent over the earlier comparable period. This increase was achieved despite significantly lower gains on sale of investment securities during the current period. Gains on sale of investment securities during the current period was Rs 7 million compared to Rs 102 million earlier.
The bank said the improvement in profit before taxes however, was offset by increases in the rates of taxation. The bank whose main business is provision of financial services is liable for VAT on financial services at the rate of 20 percent with effect from 1 January 2006, the highest VAT rate and which additionally is not a deductible expense for income tax purposes. The Income tax rate also increased from 30 to 35 percent with effect from 1 April 2006.
Since the bank adopts the full liability method for deferred tax, the increase in the rate of income tax had a significant impact on the provision charged for deferred tax brought forward as well as arising in the current period.