DFCC Vardhana Bank PLC (DVB) posted a net profit of Rs.299.2 million for the quarter ended June 30, 2015 (2Q15), up 3.6 percent from the same period last year, amid higher allowances for bad loans and other losses and overheads, the interim financials released to the Colombo Stock Exchange showed.
The earnings per share edged up to Rs.1.05 from Rs.1.02.
However, the net profit for the six months ended June 30, 2015 (1H15) increased by as much as 85 percent year-on-year (yoy) to Rs.635.5 million backed by a strong first quarter.
The bank’s first quarter saw its net profits rising as much as 506 percent yoy to Rs.336.3 million. The six months’ earnings per share rose to Rs.2.24 from Rs.1.21 a year ago.
The return on equity increased to 14.22 percent by the end of 1H15 but down from 15.21 percent at the end of 1Q15. The Net Interest Income (NII) during the 2Q15 grew by 19 percent yoy to Rs.996.5 million due to the fall in interest expenses while the growth for the 1H15 was 28 percent year-on-year (yoy) to Rs.1.9 billion for similar reasons.
The loans and receivables grew by 5.4 percent or Rs.3.7 billion during 2Q15, slightly above 4.9 percent growth (Rs.3.2 billion) in the first quarter.
During 1H15, the total loans and receivables grew by 10.6 percent or Rs.7 billion to Rs.72 billion.
The bank has an asset base of Rs.111.9 billion, up 10.5 percent during the 1H15.
Leasing portfolio had the highest growth of 59 percent during the 1H15 to Rs.4.3 billion. Term loans and trade finance portfolios too showed growths but the pawning portfolio contracted.
The deposit base grew by only 2.7 percent or Rs.1.9 billion during the 1H15 to Rs.72.6 billion and the low cost, Current and Savings Account base (CASA) base was at 25.6 percent. This is significantly below the industry average which hovers round 40 percent.
Meanwhile, the non-fund base income during the 2Q15 grew by 16 percent yoy to Rs.398 million of which net fee and commission income which composed of the largest share rose by 10.4 percent yoy to Rs.221.2 million.
The non-fund base income for the 1H15 rose by 34 percent yoy Rs.806 million.
The total operating income – the NII and the non-fund base income - rose by 18 percent yoy to Rs.1.39 billion in 2Q15 and 33 percent yoy to Rs.2.8 billion in 1H15.
The allowances for bad loans and other losses rose by 41 percent yoy to Rs.144.6 million, but these allowances for the 1H15 declined by 27 percent yoy to Rs.278 million.
The asset quality measured by the non-performing loan ratio slightly weakened to 5.02 percent from 4.72 percent six months ago.
The total operating costs for the 2Q15 rose by 25 percent yoy to Rs.726 million while for the 1H15 the costs rose by 22 percent yoy to Rs.1.4 billion.
Personnel costs which accounted for half of the total operating costs rose by 48 percent during both periods. The return on assets edged down to 1.2 percent from 1.24 percent six month before.
The bank operates with adequate liquidity as its statutory liquid assets ratio – in the domestic and the off-shore banking units – stood at 23 percent and 29 percent respectively, above the minimum 20 percent requirement.
Both tier I and tier II capital adequacy ratios stood at 10.52 percent and 13.85 percent respectively, above the minimum requirements of 5 percent and 10 percent each.
After the proposed merger between NDB Bank PLC and DFCC Bank PLC and DVB was shelved, the directors of both DFCC Bank PLC and DVB on July 9 sought the Central Bank’s approval to amalgamate the two entities and operate as a licensed commercial bank.
The banks have also convened Extraordinary General Meetings of both DFCC and DVB to be held on August 28, 2015 to obtain the approval of the shareholders. DFCC Bank PLC holds 99.2 percent stake in DVB.