Strong growth at DFCC Vardhana Bank in 1H

DFCC Vardhana Bank PLC (DVB)’s interim financial results for six months ended 30 June 2012, reflecting strong overall growth in both gross income and net earnings.

A commercial banking subsidiary company of DFCC Bank, DVB’s unaudited interim financial results indicated a total income of Rs. 3,261 million on fund-based and fee-based activities.

The bank recorded a pre-tax profit of Rs. 466 million and an after-tax profit of Rs. 278 million during the period. Significantly, its total income for the first half of the year displayed an increase of 77% over the gross income earned during the corresponding period in 2011, while its net earnings show an increase of 84% as compared to the same period in the previous year.

The sharp increase in the gross income and profit after tax for the six months ended in June 2012 has been the result of corresponding high growth in total assets and fee-earning commitments and contingent liabilities achieved during the latter half of 2011.

Further, total assets of the Bank stood at Rs. 56,057 million at the end of the first quarter compared to a corresponding figure of Rs. 35,434 million in the previous year, depicting a growth of 58% during this period. In a similar upward trend, the fee-earning commitments and contingent liabilities increased by 52% from Rs. 14.4 billion as at 30 June 2011 to Rs. 21.9 billion at the end of June 2012.

It is evident from these positive growth trends that earnings of the Bank, including total income and profit after tax showed a significantly higher rate of growth above the rate of increase in total income generating assets and fee-generating liabilities during the six months ended 30 June 2012. Though total income increased by 77% compared to first six months of 2011, the operational expenses and loan loss provisions increased by a mere 26.8%, thereby making it possible for net earnings to expand faster. Similarly, the lower rate of corporate taxes also contributed to expand the profit after tax during the first half of 2012.

The gross non-performing asset (NPL) ratio stood at 5.1% as at 30 June 2012. Though this is a reduction of around 50 basis points from the NPL 5.6% by end June 2011, it is higher than the NPL of 4.4% of the Bank as at 31 December 2011. The NPL net of provisions was 2.1% while provision cover for non-performing loans amounted to 58.8% as at 30 June 2012.

The credit/loans ceiling imposed by the regulator on all lending institutions is expected to impact the expansion of the bank’s loan books adversely in the second half of the financial year. Despite this obstacle, the bank’s aggressive deposit mobilisation activities are paying rich dividends in the form of higher deposits and an increase in the customer base.

Commenting on the results DFCC Vardhana Bank CEO Lakshman Silva stated, “Our first half year results for 2012 reflect our continued growth during a tough period for the financial industry both locally and internationally. As one of the fastest growing banks in Sri Lanka we plan for regulatory and market changes while we continue to serve our customers with the most competitive products and services. Our close relationship with our customers is a distinguishing factor that enables us to continue producing notable results.”

DVB’s unique savings campaign has captured the imagination of depositors and the bank’s management is confident that it can leverage on this heightened interest in DVB’s savings products to bridge the gap brought about by new lending regulations.

In the months ahead, the bank aims to concentrate on devising an ideal product mix in tandem with the existing loans and advances portfolio to improve interest yield on lending. DVB plans to forge ahead in the latter half of the year 2012 to consolidate the financial gains achieved in the first half of the year.