Narrowing Margins

Feb 09, 2012 (LBO) – Sri Lanka’s DFCC Bank group’s net profit for the December 2011 quarter rose 48 percent to 954 million rupees from a year earlier, partly helped by lower taxes, amid narrowing margins, interim accounts showed. Customer deposits at had DVB increased 30 percent to 28.7 billion rupees in the 12 months ended 31 December 2011.

Liquidity in Sri Lanka banking system dried up during the second half of 2011 as the Central Bank started to defend a dollar peg amid higher loan growth.

The central bank started buying up Treasury bills to print money to re-inject lost liquidity (sterilize interventions) keeping credit growth high, and putting more pressure on the peg.

Loan loss provisions fell to 34 million rupees in the quarter from 44 million rupees with 185 million rupees in new specific provisions, 28 million in general provisions and 193 million in write backs.

Unspecified non-interest income rose to 696 million rupees in the December 2011 quarter from 559 million rupees a year earlier.

Value added tax on financial services fell to 134 million rupees from 243 million rupees a year earlier and income tax fell to 227 million rupees from 360 million rupees.

Group gross assets rose 109.5 b