DFCC Bank is witnessing a gradual improvement in the credit quality despite a reduction in portfolio, according to Chief Executive Officer Nihal Fonseka.
DFCC posted a 13.8% increase in net profits of Rs.1.3 billion for the nine months ended 31 December 2009 compared to the corresponding period in 2008. A statement by Mr. Fonseka on the Bank’s financial performance said a combination of portfolio reduction due to continued low demand for project loans and the sharp drop in market lending rates during the third quarter resulted in the reduction in the interest margin and net interest income from lending activities.
However the Bank was able to contain costs (non-interest expenses) at below the comparable period.
Mr. Fonseka’s statement noted that the gross non-performing loans, advances and leases (NPA) ratio was 10.4%, a reduction from 12.1% on 30 September 2009 although it is higher than the 9% recorded on 31 March 2009. The total NPA’s have shown a reduction to Rs.5.38 billion in December 2009 from Rs.6.28 billion in September 2009. Mr. Fonseka said the Bank is witnessing a gradual improvement in the credit quality despite the reduction in portfolio through its efforts in collection and rehabilitation of projects. The total provisions (specific and general) and interest in suspense covered 60.1% of the consolidated gross NPA.
Consolidated earnings per share for the period under review increased to Rs.14.16 from Rs.12.49 over the comparable period. The consolidated profit attributable to the shareholders of the Bank increased by 14.9% to Rs.1.8 billion. The contribution to profits from Commercial Bank of Ceylon PLC was slightly lower but Lanka Ventures PLC, a subsidiary of the Bank returned to profitability from the loss incurred in the comparable period resulting in higher consolidated profit.
The nine months net profit of Commercial Bank of Ceylon recorded a marginal decrease of 2.3%. The contribution from DFCC’s subsidiary, DFCC Vardhana Bank (DVB) was Rs.146 million compared with Rs.88 million in the corresponding period in 2008. Since both Commercial Bank and DVB end their financial year in December, the consolidated financial statements for 31 December include the results for the nine months to 30 September.
Lanka Ventures PLC recorded a net profit of Rs.69 million in the period under review compared with a loss of Rs.78 million for the corresponding period in 2008.