The DFCC group licensed commercial banking arm, DFCC Vardhana Bank PLC (DVB), posted a net profit of Rs.336.3 million for the quarter ended March 31, 2015 (1Q15), recording a 506 percent growth over the corresponding growth last year, the interim financials released to the Colombo Stock Exchange showed.
The performance was possible due to strong core-banking operations, non-fund-based incomes and lesser provisions against possible loan losses.
The earnings per share increased to Rs.1.18 from 20 cents a year ago.
The net interest income rose 38.2 percent year-on-year (YoY) as the interest expenses fell at a faster pace than the interest income. This is because the re-pricing of the loans and deposits of the bank were under the low interest rates environment.
Interest expenses fell 32.3 percent YoY to Rs.996.7 million while the interest income fell by 9.6 percent YoY to Rs.1.97 billion.
Despite the falling interest rates the bank managed to increase its net interest margin to 3.79 percent from 3.67 percent on December 31, 2014.
The bank said the loan growth observed in the latter half of last year contributed to the exceptionally well first quarter performance of 2015.
Meanwhile, the bank’s loan book recorded a 4.9 percent growth during 1Q’15. Further, the return on equity (RoE) grew up to 15.21 percent, slightly less than the industry average hovers around 16 percent. The RoE by December 31, 2014 stood at 13.38 percent.
Deposits slightly fell to Rs.69.6 billion from Rs.70.7 billion predominantly due to the fall in rupee deposits as the investor appetite is lesser for bank deposits under the lower interest rates.
Meanwhile, the non-interest incomes too rose by 58 percent YoY to Rs.408 million supported by the fee and commission-based incomes, net gains from trading, income from financial investments and other operating income.
Further, the total impairment provisions against loans and other losses fell by 52 percent YoY to Rs.133 million.
The total operating expenses rose 20 percent YoY to Rs.675.7 million.
DVB’s capital adequacy levels stands comfortably above the regulatory minimums as both Tier I and Tier II capital adequacy ratio stood at 11.41 percent and 12.22 percent, respectively. However, the two ratios slightly weakened due to asset growth from 12.24 percent and 13.08 percent on December 31, 2014.
After the termination of the merger between NDB Bank PLC and DFCC Bank PLC along with DVB to create a development financier, DFCC Bank last week sought the approval from the Central Bank to amalgamate DVB and run as a single entity.
DVB has 137 branches and extension offices which include 59 units across the Sri Lanka Post network.
DFCC Bank holds a 99.2 percent stake in DVB.