DFCC Bank September soars on higher loans, lower impairments

As the September quarter earnings season has entered its final stretch, DFCC Bank PLC reported some solid numbers for the three months, supported by the robust growth in new loans, higher fee incomes and lower impairments.

The bank gave Rs.27.4 billion in new loans in the July-September quarter, bringing the nine-month growth in the loan book to a robust Rs.100.27 billion or a 22.7 percent growth to Rs.541.18 billion by the end of the quarter.

The bank reported a net interest income of Rs.7.82 billion for the same three months, up 11 percent from the same period last year while the provisions against the possible bad loans fell by a sharp 47 percent to Rs.864.39 million, reflecting the rising confidence in the bank of the ability of its borrowers to settle their facilities. Before the results were released, the bank’s share ended the day 2.26 percent higher at Rs.169.75.

The counter was among the largest contributors to the day’s advance in the All Share Price Index and also the biggest contributor to the turnover, doing Rs.561.01 million. “These results are a reflection of deliberate choices and shared purpose, from accelerating home ownership and mobility propositions, to deepening our engagement with micro and SME sector entrepreneurs,” stated the bank’s CEO Thimal Perera in an earnings release. The bank reported earnings of Rs.6.28 a share or Rs.2.74 billion for the quarter, compared to Rs.3.24 a share or Rs.1.35 billion in the corresponding period last year.

This was a solid 103 percent jump.

The net interest margin narrowed somewhat to 3.95 percent, from 4.18 percent at the beginning of the year, amid the declining interest rates but the bank tried to make up for the narrowing margins by trying to make a lot of money from fee incomes.

Such incomes soared by 58 percent to Rs.2.03 billion while the bank attributed these to “higher volumes across remittances, credit-related charges, trade commissions and other fee-generating activities. Growth in the credit card portfolio further contributed to this momentum”.

The stage three loan ratio, a measure of asset quality, declined to 4.82 percent, from 5.65 percent at the end of last year, reflecting the improving asset quality.

Meanwhile, the deposits grew by Rs.102.81 billion in the three months to Rs.567.96 billion. The government in concert held 25.17 percent in DFCC Bank via Bank of Ceylon, Sri Lanka Insurance Corporation, the Employees’ Provident Fund and Employees’ Trust Fund.