DFCC posts Rs. 3.5 b profit after tax in FY13

DFCC Bank in its Annual Report for 2012/13 released last week presented good progress on all fronts. The consolidated profit after tax of the group increased 16% to Rs. 3,538 million. The contribution from the combined banking business of DFCC Bank (DFCC) and its 99% owned subsidiary, DFCC Vardhana Bank (DVB) was up 19% to Rs. 3,407 million.

Commenting on the results, Chief Executive Nihal Fonseka stated: “I am happy to say that DFCC delivered better results in many areas compared to 2011/12 and even more importantly was able to make progress on several key aspects of the strategic re-positioning which commenced in the previous year. Amidst a somewhat challenging operating environment, total income of the combined DFCC Banking Business (DBB) comprising of interest income and other income recorded an increase of 47.8% to Rs. 17,862 million in the year under review.

 



Gross loans and advances of DFCC Bank increased 10%, while DBB grew by 14.7%.

“DFCC Vardhana Bank increased its exposure to personal financial services assets whilst construction, especially finance for contractors, and domestic trading sectors recorded relatively higher levels of credit growth. Customer deposits of DBB grew by 37.3% during the year.”

It is heartening to note that DFCC’s overall credit quality of the portfolio has been maintained. The DFCC banking business’s impaired loans, advances and receivables as measured in accordance with the applicable new IFRS-based accounting standards which came into effect, as a proportion of the total portfolio has reduced from 7.3% to 7.1% during the year.

Expenses have also been managed effectively with DFCC Bank’s ratio of operating expenses to total operating income (before impairment charge) improving further from 30% to 28.7% during the year.

Chairman J.M.S. Brito noted in his message: “A key deliverable is return on investment. A shareholder of DFCC would have received a total of Rs. 57.50 in dividends for each share held over the ten-year period from 2003 to 2012, which works out to an average dividend of Rs. 5.75 per share per annum. In overall terms taking into account the bonus issues and the rights issue during this period, the Total Shareholder Return (TSR) works out to approximately 20% per annum.”

Consolidated group equity increased from Rs. 32,927 million (including minority interest) to Rs. 37,252 million. Earnings per share increased to Rs. 13.04 from Rs. 11.19.

In this reporting year, DFCC made a transition to the new Sri Lanka Accounting Standards that are IFRS-compliant. Commencing with this Annual Report, DFCC has also made a transition to presenting integrated reports drawing on concepts from the International Integrated Reporting Framework. The aim is to report how strategy, governance, performance and prospects lead to the creation of value to all the bank’s stakeholders, shareholders, customers and business partners, employees, community and the Government.

DFCC Bank is one of the oldest development financial institutions in the world. Established under an act of parliament in 1955, it is private sector in form with project financing continuing to be its forte. As Fonseka noted: “DFCC Bank is the apex entity in the group. It has never lost sight of its special role in the development agenda of the country, even after its conversion in the late 1990s from Development Finance Corporation of Ceylon, an unregulated provider of finance, to a specialised bank regulated under the Banking Act. It required a change in its business model, but it has continued to be in the forefront of sustainable development financing.”

Veteran banker Fonseka who will relinquish office at DFCC by the end of September 2013 after serving 14 years as Chief Executive noted in his conclusion: “The transformation from a narrowly focused specialised bank to a financial services group, with growth of total assets from Rs. 24,071 million to Rs. 151,124 million and market capitalisation from Rs. 3,350 million to Rs. 34,754 million during my tenure could not have been achieved without  the support of our valued customers from all over the country. I salute them all for the faith they have demonstrated in the DFCC Group.”