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| Tuesday, 29 June 2004 |
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DFCC Bank profit after tax up 27% to Rs. 1,085 m Stronger asset growth, continued improvement of the quality of the loan portfolio, new initiatives in resource mobilisation and the successful migration of operations to a cutting edge technology platform were the hallmarks that characterised a successful year.
Profit after tax at DFCC Bank level before equity accounting for subsidiaries and associate increased by 27% to Rs. 1,085 million while the Group profit recorded an increase of 14% to reach Rs. 1,293 million, said Chief Executive Director Nihal Fonseka. Greater business confidence underpinned by the continuing ceasefire between the Government and LTTE and the single digit interest rate, was the prime facilitator for the Bank's performance. The strategic acquisition of a licensed commercial bank, re-branded DFCC Vardhana Bank Limited, will add a new dimension to the way DFCC Bank will do business. This move will enable us to leverage on our core competencies in development banking to offer the full spectrum of financial services demanded by our customers, especially those small and medium sized enterprises (SMEs) we assist through our branches, he said. Gross approvals of loans and leases during the year under review totalled Rs. 17,930 million, compared to Rs. 10,819 million in the previous year. Disbursements, which lag approvals, amounted to Rs. 12,217 million, an increase of 44% over the previous year. The finance leasing portfolio grew strongly by 56% to reach Rs. 3,567 million, fuelled by increased demand for this product from the SME sector. It was particularly satisfying that about 65% of new leases granted were disbursed by our branches located outside the Western province. The Bank's continued efforts in the restructuring and rehabilitation of projects facing problems and the orderly disposal of assets belonging to some projects that had failed, coupled with credit growth, resulted in non-performing loans and finance leases decreasing from Rs. 2,912 million to Rs. 2,621 million and the ratio of non-performing loans and leases to the total, improving from 13.3% to 10.3%. Nevertheless, the Bank continued its policy of making provisions above the minimum required by regulation when warranted. Net specific provisions of Rs. 330 million were made for bad and doubtful debts, compared to Rs. 401 million in the previous year. This included the additional provisions required in terms of the 'haircuts' on collateral imposed by the Central Bank of Sri Lanka that became effective in January 2004. The Bank's investment banking operations capitalised on the positive environment that prevailed for much of the year, and lead managed a very successful Initial Public Offering for Rs. 600 million. The Bank also acted as the financial adviser to the single largest debt raising of US$87 million by a Sri Lankan company in recent times. The Bank's associate and subsidiary companies contributed positively to Group results. DFCC Stock Brokers (Pvt) Limited had an excellent year and benefited from a highly motivated team that capitalised on the buoyant market conditions that prevailed. Lanka Industrial Estates Limited (LINDEL), a mature investment that manages an industrial estate, made a positive contribution. The fund management subsidiary, National Asset Management Limited (NAMAL), under-performed although it was profitable and the funds under its management fared well. Improvement of its fortunes will depend on its ability to increase the quantum of funds under its management. The venture capital subsidiary, Lanka Ventures Limited (LVL), had a good year and its performance was further boosted by a one-off refund of taxes paid previously. However, acceptable venture capital opportunities continue to be scarce and the governance structure of many enterprises that seek such capital makes venture capital a difficult business. The AGM of the Bank will be held tomorrow at the Colombo Plaza. The Directors have also recommended a dividend of 55%. |
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