Sri Lankan banking group DFCC has recorded a group income of Rs. 12.97 billion for the nine months to end-December 2010, up from Rs.9.89 billion for the same period the year before. Financials suggested this uptake was largely a result of non-interest income (mostly investing activities) which had skyrocketed to Rs. 5.61 billion, from Rs. 770.45 million in 2009. At the same time, interest income fell to Rs. 7.36 billion, from Rs. 9.12 billion in 2009; mainly attributed to decreasing income from loans and advances.
On the other hand, expenses remained virtually static (non-interest expenses and provision for bad and doubtful debts and loans written off), except for interest expenses. This line item actually dropped significantly, prompted by an almost halving of costs associated with deposits, to Rs. 1.54 billion in 2010, from Rs. 2.38 billion in 2009.
Meanwhile, for the three months to end-December 2010, group income was virtually at a standstill at Rs. 3 billion. While there was a minor drop in interest income, it was non-interest income again that more than doubled to Rs. 559.26 million. Also, there was a significant fall in interest expenses to Rs. 1.07 billion and a relatively much smaller increase in non-interest expenses to Rs. 731.66 million.
The biggest change was in the provisions for bad and doubtful debts and loans written off line item, where recoveries for the quarter outperformed new provisions to the tune of Rs. 44.63 million. Additionally, after tax profit for the period grew relatively slightly to Rs. 651.03 million. Segment-wise, group income from virtually all units (lending, financial leasing, commercial banking and venture capital) decreased significantly. owever, as mentioned before, this was more han offset by a significant rise in "investing in equity" activities, namely or no-interest income.
According to DFCC Chief Executive Nihal Fonseka, who was quoted in these financials; "The Bank’s non-audited profit after tax for the 9 months ended 31 December 2010 (current period) was Rs 6,616 million compared with Rs.1,327 million in the 9 onths ended 31 December 2009 (previous period). This includes an exceptional rofit contribution of Rs. 5,361 million arising from the reduction of voting ordinary shareholding in Commercial Bank of Ceylon PLC (CBC) to 15% from 26.8% during June to August 2010. The consolidated profit after tax for the current period was Rs 4,543 million compared with Rs. 1,952 million in the previous period.
The consolidated profit is lower mainly due to consolidation adjustments arising from CBC ceasing to be an associate company from 2 June 2010." Elaborating, he noted that putting aside the extraordinary profits from the sale of DFCC's CBC stake; "the post tax profit of the bank was Rs. 1,255 million in the current period, 5.4% lower compared to Rs 1,327 million in the previous period. At the half year stage the post tax profit of the Bank excluding the impact of the CBC transaction was lower than the post tax profit for the comparative period by 16% .
The bank was able to narrow this gap during the third quarter due to significant reduction in non-performing loans and a higher level of recoveries of loans previously provided, a slight improvement in interest margin through liability re-pricing and a lower level of provisioning. These factors contributed to a profit after tax of Rs. 507 million in the third quarter of the current period, an increase of 17% over the third quarter in the previous period."