DFCC profits up marginally

The DFCC Group recorded a consolidated profit after tax of Rs. 713 million for the 1st quarter ended 30 June 2012 up 1.5 percent from Rs. 702 million the previous year, the bank announced earlier this week. The banking business contributed Rs. 617 million to profit after tax

Its investment banking joint venture, Acuity Partners (Pvt) Ltd (APL) contributed Rs. 49.5 million in the current period marginally lower than Rs. 52 million in the comparable period. The environment was not conducive for investment banking business and the contribution from APL’s core activities was significantly lower than in the previous period.  However, APL benefitted from an issue of new shares to minority shareholders by a subsidiary at a premium to net asset value which gave rise to  deemed disposal profit of Rs. 142 million attributable to APL and recognized  in APL’s consolidated income statement. The contribution from all other subsidiaries and associate company collectively was Rs. 15.6 million in the current period (Rs. 30.5 million in the comparable period).

The interest income of DBB in the current period was Rs. 3,242 million, an increase of 54% over Rs. 2,099 million in the previous comparable period.  The higher interest income was the result of portfolio growth with total loans and advances (excluding interest receivable) increasing 45% from Rs. 65,527 million on 30 June 2011 to Rs. 94,808 million on 30 June 2012,   as well as due to the increase in market interest rates by several percentage points during that time.  However, the rising trend in interest rates also had an adverse impact on funding cost. The environment was not conducive to raising medium and long term funds from the domestic market as investor appetite for such investments was very low.

Mobilization of demand and lower cost savings deposits also became difficult with investor preference shifting to short tenor time deposits.  Thus, although DBB increased its customer deposit base by 98% from Rs. 26,613 million on 30 June 2011 to Rs. 52,634 million on 30 June 2012 there was a shift to higher cost term deposits and this change in the funding mix resulted in interest expense of DBB increasing from Rs.980 million in the comparable period to Rs. 1,914 million in the current period, an increase of 95%. The interest margin of DBB thus reduced, as was the case for the overall banking sector, and the net interest income of DBB was Rs. 1,328 million in the current period recording a modest increase of 19% over Rs. 1,119 million in the comparable period.

 Hits: 8     Send to Friend