Archives

The DFCC Bank's non-audited group profit after tax increased by 16% for the nine months ended December 31, 2003 (current period). The group profit after tax was Rs. 933 million.

The profit at the previous comparable period (April to December 2002) was Rs. 801 million, said General Manager / Chief Executive Officer, Nihal Fonseka.

The investments in subsidiaries and associate are accounted under the equity method of accounting. Under this method the Bank's income statement includes the share of the undistributed post tax profit of its subsidiaries and associate and consequently the reported post tax profit of the Bank (PAT) is equal to the group post tax profit attributable to the Bank.

During the current period, our borrowing customers whose rates of interests were pegged to weighted average deposit rate or weighted average prime lending rate, benefited from the reduction in interest rates.

In addition, the Bank reduced the previously fixed lending rates applicable to Plantation Sector Enterprises from December 1, 2003, passing on the full benefit of a reduced interest cost on refinance provided by the Government for the remaining life of loans. The growth in interest income in the current period was therefore not commensurate with the growth in the loans and finance lease portfolio, he said.

The Bank's management however believes that a reduction in on-lending rates without sacrificing the interest spread augurs well for the financial health of our borrowers and consequently the quality of the portfolio. Furthermore, this development is in line with the Government's policy of reducing the interest rates in order to stimulate faster economic growth

As commented in the previous quarter, the Bank adopted certain pro-active measures to maintain its interest spread commensurate with the risk and costs of financial intermediation. This included a strategy of reducing the cost of funds by developing a sustainable, domestic time deposit customer base to reduce the Bank's dependency on higher cost domestic institutional borrowing and also promoting strong growth in higher yielding lease portfolio.

The combined effect of these developments caused the net interest income to grow by 34% in the current period. Other income of Rs. 477 million increased by 22% from Rs390 million in the previous comparable period. Other income includes dividend income, profit on sale of shares, gains on sale of debt securities and fees.

Operating profit before provisions was Rs. 1,276 million, an increase of 36% over Rs937million in the previous comparable period.

The cumulative gross specific provision charged to income for the nine months was Rs. 347 million, which was 14% higher than the Rs. 304 million charged in the previous comparable period.

This includes additional provision made by the Bank over and above the minimum required under the direction issued by the Central Bank of Sri Lanka (CBSL). In making this provision the Bank has also taken into account the continuing difficulties and delays experienced in debt recovery and the direction issued by CBSL in August 2003 amending the basis for computing the mandatory minimum provisions to be effective from 1 January 2004.

This amendment requires the forced sale value of immovable property mortgaged as security for non-performing loans to be discounted by a percentage when the age of the arrears of the loan is six months or more.

This discount is initially 25% increasing to a maximum of 60% when the loan is in arrears for 54 months or more. The results for the quarter include a goodwill amortisation cost of Rs. 9 million arising from the acquisition of 94.16% of the ordinary shares in National Mercantile Bank Ltd in August 2003.

This subsidiary was renamed as 'DFCC Vardhana Bank Limited' (DVBL) in October 2003. The post acquisition loss of DVBL amounting to Rs17 million, attributable to the Bank for the period 1 August 2003 to September 30, 2003 is included in the results for the quarter.

The amortisation of the goodwill cost of Bank's investment in the associate company, Commercial Bank of Ceylon Limited was completed in the previous financial year.

The profit before tax of Rs. 1,266 million is a 19% increase over Rs. 1,064 million in the previous comparable period. The current period however bears an additional expense of Rs 93 million as Value Added Tax introduced on January 1, 2003 and only 25% of this expense is deductible in computing income tax.

www.ceylincoproperties.com

www.ppilk.com

www.crescat.com

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries

Produced by Lake House
Copyright © 2003 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager