DFCC Bank Dec. profits up 80% from lower provisions and capital gains from ISBs

DFCC Bank PLC reported some solid financial performance for the three months ended in December 2024 backed by strong lending book, impairments on loans which were only a fraction from a year ago and also some sizable amount of capital gains from the sale of the International Sovereign Bond investments.

The bank reported net interest income of Rs.7.39 billion, down 3.0 percent from the same period a year ago on the back of interest expense which fell at a faster pace than the decline in the interest income.

As a result the net interest margin, which is the spread between what is charged from its borrowers for its loans and what the bank paid for its deposits, narrowed to 4.18 percent by the end of the financial year from 5.18 percent at the beginning of the year.

Unlike those banks which reported their December quarter results so far, DFCC didn’t have any provision reversals on account of the sovereign bond investments.

This is because the bank had sold part of its sovereign bond investments back in the second quarter last year which at the time resulted in a gain of Rs.2,056 million. At the time it resulted in a provision reversal of Rs.2,453 million but incurred a loss of Rs.2,172 million from the net losses from its de-recognition.
In December 2024 however the bank reported a gain of Rs.768.98 million for the quarter and Rs.990.92 million for the year from the sale of its remaining sovereign bonds, following the finalization of bond restructuring.
The bank also saw substantially lower provisions for possible bad loans of Rs.387.12 million compared to provisions of little over a billion rupees in the year earlier period.

Besides, the bank was also seen reversing provisions of Rs.442.76 million on other financial assets and credit related commitments in the quarter compared to impairments of Rs.43.77 million in the year earlier period.
Meanwhile, among other non-fund based incomes, net trading gains reported as Rs.613.52 million for the quarter, turning from a loss of Rs.318.45 million in the year earlier period, mainly due to the marked-to-market gains of its equities portfolio recognized under ‘financial assets through profit or loss’, which are measured at fair value.
These gains and lower provisions helped the bank to report earnings of Rs.6.47 a share or Rs.2.78 billion for the October- December quarter compared to Rs.3.71 a share or Rs.1.55 billion in the same period in 2023, which translated to a 80 percent increase. The earnings were also supported by the net fee and commission income of Rs.1.37 billion, up 11 percent from a year ago.

For the full year, the bank reported earnings of Rs.22.71 a share or Rs.9.78 billion compared to Rs.20.30 a share or Rs.8.46 billion in 2023, a 15 percent increase.

The bank gave loans worth Rs.46.22 billion to Rs. 440.91 billion, at a 11.7 percent growth expansion in its gross loan book. Deposits grew by 14.2 percent or Rs.57.77 billion to Rs.464.36 billion. 
The stage 3 loans ratio also fell to 5.65 percent from 7.03 percent at the start of the year, reflecting improved asset quality.