Credit Crunch

Feb 23, 2008 (LBO) – Loans approved by Sri Lanka’s DFCC Bank in the nine months to December 2007 has plunged to 10 billion rupees from 17 billion a year before, the company told shareholders. DFCC said lower credit demand for capital expenditure, high interest rates and an effort to maintain credit quality slashed loan approvals.

“The Bank was particularly cautious in expanding the fixed rate medium term leases due to credit and market risk concerns and also due to changes to tax structure introduced in the last budget that affected the profitability of this product,” DFCC Bank said.

Sri Lanka’s interest rates and inflation has been rising since 2004 when fiscal and monetary policy started to deteriorate.

In the December quarter group profits at 527 million rupees were up one percent from a year before, while revenues rose 36 percent to 2.8 billion rupees.

Pre-tax profits were one billion rupees with 506 billion coming from associate company Commercial Bank of Ceylon.

DFCC also showed a loan recovery of 218 million for the quarter, up from 94 million the year before. Separately, the cash flow statement for the 9-months showed total cash recoveries of 123.5 million, up