Impairment provisions affect DFCC’s bottom line
View(s):DFCC Bank PLC, the banking arm of the DFCC Group, has reported a drop in profit for the second quarter amidst a challenging business environment.
The drop in profit was due to higher impairment provisions, as well as a one-off gain from the disposal of shares of Commercial Bank during the previous period.
Overall, the DFCC Group, whose business covers commercial banking, investment banking, wealth management, information technology, industrial park management and consultancy recorded a profit before tax of Rs. 2,596 million and profit after tax of Rs. 1,861 million for the period ended June 2018 as compared to Rs. 3,616 million and Rs. 2,944 million respectively, in the comparative period in 2017.
A media release issued by DFCC said that the bank posted a pre-tax profit of Rs. 2,402 million and a post-tax profit of Rs. 1,710 million which reflects a decline of 30 per cent and 39 per cent respectively compared to the same period in 2017.
When adjusted for the exceptional gain from sale of Commercial Bank shares reported in the previous period, the decline in pre-tax and post-tax profit was 5 per cent and 10 per cent, respectively.
The impairment provision during the current period was Rs. 1,407 million compared to Rs. 487 million in the comparable period. However, recovery processes are being rigorously pursued to minimise any actual losses that may arise from such exposures, DFCC said.
On a positive note, with increased customer interest in the bank’s commercial banking products, the bank recorded a healthy growth of 24 per cent in Net Interest Income to Rs. 6,556 million from Rs. 5,303 million mainly as a result of the portfolio growth of Rs. 38,229 million in loans and receivables year-on-year and prudent management of asset and liability re-pricing.
DFCC Bank’s CEO, Lakshman Silva said that despite profits being adversely impacted due to impairment, he is encouraged by the growth seen during the period in terms of expansion of island-wide footprint and continued focus on launching technologically advanced products and services.