Nov 05, 2012 (LBO) – Sri Lanka’s DFCC Bank said group profits rose 55 percent to 819 million rupees in the September 2012 quarter from a year earlier, and its commercial banking unit hit regulatory ceiling on credit growth. DFCC group performing loans grew 7.5 percent to 90.9 billion rupees from March, but chief executive Nihal Fonseka told shareholders in statement that DFCC Vardhana Bank (DVB), a commercial banking unit hit an 18 percent regulatory ceiling on credit growth by June 2012.
Sri Lanka’s central bank set an 18 percent credit ceiling for 2012, after sterilized foreign exchange sales from mid 2011 pushed the country into an unsustainable credit bubble causing a balance of payments crisis.
Fonseka said DVB had got a foreign credit line which would lift the ceiling up to 23 percent and would allow it to lend up to a billion rupees till the end of the year. DVB’s accounts are consolidated with a three month lag.
The group provided 48 million rupees for loan losses, up from 6.1 million rupees a year earlier with specific provisions of 168 million rupees and recoveries of 95 million rupees.
Bad loans rose 18.8 percent to 7.6 billion rupees. Group non performing loan ratio rose to 4.9 percent of loans by end September from 4.3 percent in March.
Group deposits grew 31 percent to 58 billion rupees, amid slow loan growth and the bank increased its government securities portfolio to 12.7 billion rupees from 9.9 billion in March.
Gross assets rose 13 percent to 134 billion rupees and net assets rose 1.7 percent to 26.1 billion rupees.
DFCC had a 4.9 billion rupee securities portfolio carried at cost in its books, which had unrealized gains of 11.3 billion rupees. The gains would be brought to the book under new accounting standard to be applied later.
Regulatory capital adequacy fell to 19.1 percent of risk weighted capital by end September from 21 percent in March, but is still higher than the 10 percent requirement.
The group reported earnings of 3.09 rupees for the quarter. For the six months to September it reported earnings of 5.66 rupees on total profits of 1.57 billion rupees, which rose 23 percent from a year earlier.
Group return on assets fell to 3.2 percent from 3.5 percent and return on equity fell to 11.6 percent in September from 11.8 percent in March.
The stock closed at 107 rupees, up one rupee on Monday.
In the September quarter, interest expenses rose 65 percent to 3.6 billion rupees, interest expenses rose 110 percent to 2.2 billion rupees but the bank grew net interest income 24 percent to 1.49 billion rupees.
Group interest margin narrowed to 4.4 percent by end September from 4.9 percent in March.
Fee income rose 16 percent to 385 million rupees with the group losing 18.9 million rupees on foreign exchange. The bank said the loss came from forex swaps where gains are recognized as interest rupee income.