Amendments to DFCC Act passed by Cabinet to pave way for NDB merger
Amendments allowing DFCC Bank’s impending merger with NDB has been passed by the Cabinet, industry sources said.
“These amendments will facilitate DFCC to become a company, thereby aiding the merger with NDB,” an industry source told the Business Times. He added that this will be similar to the parliamentary approval which was sought to enable NDB to get incorporated under the Companies Act, to facilitate the merger with NDB Bank some years ago.
“This is required by the Central Bank to issue a commercial banking licence. NDB was set up as a wholly state-owned institution by Act of Parliament in January 1979 as was DFCC. The proposal to set up DFCC was first presented by the first World Bank mission, which visited the country in 1952. The structure that was created at the incorporation of DFCC was designed through a collaborative effort between the Government and the World Bank which saw DFCC incorporated via an Act of Parliament,” the source said.
Both NDB and DFCC announced in a joint announcement in July that they have engaged Boston Consulting Group (BCG) India as their consultants to assist with the merger.
NDB and its Group companies reported a strong performance with its Profit Attributable to Shareholders crossing the Rs 2 billion mark for the six months ended 30 June 2014, its CEO Rajendra Theagarajah said at an investor Forum on Monday.
Group Profit Before Income Tax recorded a 42 per cent year-on-year growth to reach Rs. 2.9 billion for the first half of 2014, whilst the Group Profit After Tax recorded an increase of 57 per cent to reach Rs. 2.1 billion.
Group Total Operating Income of Rs.6.3 billion recorded a 17 per cent growth on a year-on-year basis, with three constituents of operating income, namely, Net Interest Income (NII), Net Fee and Commission Income and Net Gains from Trading recording a year-on-year increase of 16 per cent, 15 per cent and 38 per cent, respectively.
The bank’s impairment charges for loans and other losses of Rs. 222 million increased by 49 per cent over the prior period, and were primarily due to the increase in impairment provision on an individual basis, Faizan Osmand, CFO – NDB said.
The bank’s operating expenses recorded a 9 per cent increase over the prior period, and the cost to income ratio recorded a record low of 42.6 per cent.