DFCC Bank 4Q earnings up despite pandemic induced shocks

DFCC Bank PLC weathered the pandemic induced stresses successfully to emerge largely unscathed and reported higher earnings through prudent measures adopted to navigate the headwinds during the quarter ended December 31, 2020 (4Q20). 

The development lender turned commercial bank reported earnings of Rs.2.34 a share or Rs.716.5 million for the quarter under review compared to Rs.2.02 a share or Rs.516.1 million in the corresponding period of 2019. 

The bank in the June quarter re-classified its investments in Commercial Bank of Ceylon PLC, effective from January 1, 2020, which had a fair value of Rs.4.8 billion under ‘fair value through other comprehensive income’ where the marked-to-market gains and losses are taken out from the income statement to the statement of comprehensive income.  

The bank’s net interest income fell by 22 percent to Rs.2.46 billion amid the slowdown in business volumes, payment holidays on pandemic affected borrowers, and the general decline in interest rates in 
the economy. 

The bank gave out Rs.32 billion in net loans in the twelve months to December, out of which Rs.4.1 billion was during the final three months.

The bank has a loan book of Rs.317.2 billion. 

“Following the bank’s prudent lending policies, it did not pursue aggressive growth particularly to sectors that exhibited stress,” DFCC said in a statement.  

The bank’s non-performing loan ratio was at 5.56 percent by end-December compared to 4.85 percent a year ago.  The bank made provisions of Rs.529.4 million for quarter under review, down 35 percent from what it provided in the same period in 2019.  Meanwhile, the bank’s deposits rose as twice as its loans as the bank had Rs.62.2 billion in new deposits in the twelve months to December with Rs.14.5 billion coming in in the final three months, further pressuring net interest incomes. The net interest margin of the bank fell to 2.53 percent by end-December 2020 compared to 3.25 percent a year ago. 

The bank raised Rs.4.5 billion via Tier II debentures in the final quarter to bolster its capital and to support its lending drive.

The government controls 31.61 percent stake in DFCC Bank through Bank of Ceylon, Sri Lanka Insurance Corporation, Employees’ Provident Fund and Employees’ Trust Fund while Hatton National Bank holds 14.91 percent stake being its single largest shareholder.