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Home›Bank Earnings›DFCC Bank Q4 earnings hit by higher provisions, losses and foreign exchange expenses – Reuters

DFCC Bank Q4 earnings hit by higher provisions, losses and foreign exchange expenses – Reuters

By Amber C. Lafever
February 21, 2022
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  • However, for FY21, the bank announced an increase in profits of Rs 3.55 billion.

DFCC Bank PLC’s profits fell sharply in the three months to December due to higher loss provisions, personnel costs and currency revaluation losses, but margins improved as interest rates rose. interest, a trend that should continue this year.

The development lender turned commercial bank reported net interest income of 3.96 billion rupees for the October-December quarter of 2021, up 61% from the same period a year ago, while that bank lending increased and funding costs decreased with low cost funds raised during the year. As a result, the bank’s net interest margin increased from 2.53% at the start of the year to 2.66% at the end of the year.

While rising interest rates could slow growth in new loans and put some pressure on asset quality, banks could reap higher profits from tight spreads.

The bank extended loans worth Rs 67.7 billion in 2021, of which Rs 11.2 billion was extended in the past three months, which has slowed considerably from the previous quarter.

The banking sector got off to a flying start in the first quarter of 2021 before the resurgence of the virus hampered the rest of the year with prolonged shutdowns and restrictions.

The bank reported earnings of 72 cents per share or 230 million rupees for the quarter under review, compared to 2.59 rupees per share or 716.5 million rupees for the same period in 2020. This translated into a 68% drop.

For the year ended December 31, 2021, DFCC Bank reported earnings of Rs 11.17 per share or Rs 3.55 billion compared to Rs 9.00 or Rs 2.74 billion in 2020, recording a growth of 29 %.

The bank’s share finished Rs.3.10 or 5.07 percent lower at Rs.58.00 on Friday.

During the quarter under review, the bank’s fee and commission income increased by 6.0% and generated another negative net operating income of Rs 884.7 million, compared to a profit of Rs 216.9 million. of rupees during the comparative period in 2020, as the bank recorded a loss on exchange rate revaluation.

Typically, the bank’s other net operating income is supported heavily by the dividend income it receives from its stake in Commercial Bank of Ceylon PLC.

Meanwhile, the bank’s provisions on loans and advances and other financial assets increased by 152% and 256% to Rs 1.33 billion and Rs 595.4 million respectively.

The bank’s gross bad debt ratio rose 4 basis points during the year to 5.60% from 5.56% at the start of the year.

Meanwhile, the bank’s spending on its staff has increased by 28%.

Another notable factor in the bank’s portfolio was the extremely slow growth in deposits, which only increased by 9.83 billion rupees. However, the bank raised funds from medium-term lines of credit. Additionally, the bank offered to raise Rs 6.0 billion from a rights issue last week.

As of December 31, 2021, the government held a 30.9% stake in DFCC Bank through Bank of Ceylon, Sri Lanka Insurance Corporation, Employees’ Provident Fund and Employees’ Trust Fund Board.


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