Mr Royle Jansz - Chairman DFCC Bank, Mr Arjun Fernando - CEO DFCC Bank
The DFCC Group reported an excellent half year performance for 2017, with DFCC Bank leading the charge on the back of its strategic growth drive as a rapidly emerging full service commercial bank.
The DFCC Group comprises DFCC Bank PLC (DFCC) and its subsidiaries, Lanka Industrial Estates Limited (LINDEL), DFCC Consulting (Pvt) Limited (DCPL) and Synapsys Limited (SL), a joint venture company, Acuity Partners (Pvt) Limited (APL) and Associate Company, National Asset Management Limited (NAMAL).
DFCC Group recorded profit before tax of LKR 3,616 million in the first six months of 2017, a 68% growth over LKR 2,151 million in the comparable period in 2016. The Group recorded a consolidated profit after tax (PAT) of LKR 2,944 million up 71% over the LKR 1,721 million recorded in the comparable period. PAT for the quarter ended 30th June 2017 was LKR 1,571 million which reflects a growth of 14.4% over LKR 1,373 million reported in the first quarter of 2017.
DFCC Bank completed yet another successful first half year by reporting profit before tax of LKR 3,446 million a 74% growth and profit after tax of LKR 2,815 million a 76% growth over the period ended 30 June 2016 despite increased taxes and narrowing margins due to fluctuating interest rates which prevailed during the period.
The Chief Executive Officer of DFCC Bank, Arjun Fernando noted that this strong bottom line growth was achieved despite a challenging operating milieu. “The external environment was fairly challenging due to rising taxes and pressure on margins in the face of interest rate volatility experienced during the year. However, our sustained momentum in Q2 2017 confirms that our growth strategy is on track. We took the challenging market conditions into consideration in planning our strategy and we have deployed an array of financially prudent measures, customised financial solutions, digitalisation initiatives, branch expansion and other deposit mobilisation schemes along with staff engagement programmes to fuel our progress.”
“DFCC Bank is always striving to ensure that our customers get the very best in service by working together as a team to listen and respond to their changing needs. Our people continue to be our biggest strength, and the Bank has embarked on many customer engagement initiatives. We will continue to deliver services in the most cost effective and efficient way to provide the best possible value for our customers” he further stated.
Strengthening access to customers, the Bank opened nine full service state of the art branches in strategic locations this year, spreading DFCC’s footprint to Kahawatte, Kochchikade, Giriulla, Wennappuwa, Hikkaduwa, Nawalapitiya, Dankotuwa, Ambalanthota and Wattegama.
The Bank also increased its focus on digital transformation technology to accelerate shift away from traditional banking during the year. The Bank’s revolutionary Vardhana Virtual Wallet gained further momentum attracting a large number of users including DFCC customers, non-customers and merchants whilst also achieving a high transactional value. The Wallet is revolutionising payments and offering unparalleled convenience to customers due to its easy to use functionalities. The merchant base has rapidly expanded into large scale supermarkets, fast food chains, retail clothing chains, online stores, salons, cinemas and other merchant categories will be introduced in the near future.
This expansion has significantly extended DFCC Bank’s market coverage and ability to reach a larger and more diverse customer base. The fruition of this expansion initiative is already being reflected in the rise in deposits and lending. It is also noteworthy that despite the increase of 28% in operating cost due to ongoing expansion activities that include new branches, business promotions and IT related expenses, DFCC Bank has continued to maintain one of the lowest cost to income ratios in the industry at 47.1%, (post exceptional gain adjustment).
The Bank’s Loans portfolio grew by LKR 31,694 million to LKR 198,438 million compared to LKR 166,744 million as at 30 June 2017, reflecting a growth of 19% year on year. The year to date growth in loan portfolio was LKR 12,652 million (7%). The Bank’s deposit base increased to LKR 168,357 up 40% from LKR 120,089 million in June 2016. The growth in customer deposits during the first half year 2017 was LKR 27,843 million (20%) which was well above the growth in loan portfolio during the same period. The Bank’s CASA ratio, which represents low cost deposits over the total deposits of the Bank, has declined to 15.9% from 20.2% in December 2016. This was mainly due to the increase in fixed deposits by LKR 29,806 million during the period which was used to fund the lending growth of the Bank. The DFCC bank continues to enjoy medium to long term low cost borrowing lines that helped to reduce the funding cost. When these term borrowings are added to deposits, the ratio improves to 26.1% as at 30th June 2017.
Total assets of the Bank grew by 14,814 million (5%) during the first half 2017. The total assets growth compared to June 2016 was LKR 42,829 Million (16%).
The Bank has also retained a strong focus on lending quality. However, despite the increase seen in the Non-Performing Advances (NPA) ratio as at 30th June 2017 of 3.02% when compared to 2.97% in December 2016, this is an improvement from the March 2017 NPA ratio of 3.34%. The Bank has streamlined its recovery process and strengthened loan appraisals to help contain the accumulation of NPAs.
While pursuing rapid growth, the DFCC Group has continued to observe strict regulatory compliance and has maintained minimum capital ratios well above statutory requirements, while also enhancing shareholder wealth through dividend payments.
As at 30 June 2017, the Group Tier 1 capital adequacy ratio was 13.39% and the total capital adequacy ratio was 15.64%. The Bank’s Tier 1 and total capital adequacy ratios were 12.41% and 15.24% respectively as at 30 June 2017. The Bank is also well within the minimum capital requirement for Basel III reporting which will be effective from July 2017.
The Banking landscape is fast changing bringing about many challenges as well as opportunities. DFCC Bank’s philosophy is to provide the best service through a number of delivery channels making the products and services accessible to customers wherever they are. In line with this, DFCC Bank plans to invest significantly to increase the Bank’s digital footprint.