Financial Times

DFCC sells former Vanik property for tidy sum

DFCC Bank has made a tidy profit from the sale of a prime property in Colpetty previously owned by Vanik Inc. and acquired during the debt restructuring of the troubled merchant bank.

Net sale proceeds from the property, sold on January 16, was Rs. 278 million.

DFCC Bank chief executive officer Nihal Fonseka said the property, a block of bare land, was sold to an overseas-based buyer whom he declined to identify.
It was acquired by DFCC about three years ago during the debt restructuring of Vanik, which has been strapped for cash and has been unable to even pay interest and capital on its debentures.

Fonseka told The Sunday Times FT that the property was acquired at the time for around Rs 187 million.

The sale of the investment property was done after the balance sheet date and was reported in the notes accompanying the DFCC Bank group's non-audited accounts for the nine months ended December 31, 2003.

Group profit after tax for the period was Rs 933 million, up 16 percent over the Rs. 801 million in the previous comparable period (April to December 2002).

Net interest income grew by 34 percent in the current period.to Rs 1.2 billion while other income of Rs 477 million was an increase of 22 percent from Rs390 million in the previous comparable period. Other income includes dividend income, profit on sale of shares, gains on sale of debt securities and fees.

Fonseka said the bank was concentrating on developing a "sustainable, domestic time deposit customer base" as a cheaper source of funds and to reduce its dependency on higher cost domestic institutional borrowing. The strategy was based on service and specialized products the bank was developing and also its reputation as a stable bank with a double A credit rating.

Fonseka said the financial lease portfolio increased by a significant 60 percent on a base of Rs 2,152 million on 31 December 2002, mainly to the small and medium enterprise sector.

"This shows we're very active in the SME sector."

Asked about expanding the branch network, Fonseka said DFCC opened two more branches last year but that the network would increase by not more than another two branches.

Operating profit before provisions was up 36 percent to Rs 1.3 billion, Fonseka said in a statement on the bank's nine month results.

The gross loan portfolio on 31 December 2003 was Rs 20.7 billion, up eight percent over the previous comparable period.

Gross approvals for the nine-month period under review had doubled to Rs 12 billion from the comparable previous period, Fonseka said.

"This demonstrates a stronger demand for credit stimulated by improved economic conditions and investor confidence that prevailed during most of the current period," he said.

"The total of loans and leases approved but not disbursed as at 31 December 2003 amounted to Rs7.4 billion compared with Rs3.7 billion a year ago."

The cumulative gross specific provision charged to income for the nine months was Rs 347 million, 14 percent higher than the Rs 304 million charged in the previous comparable period. This includes additional provision made by the bank over and above the minimum required by the Central Bank.

"In making this provision the bank has also taken into account the continuing difficulties and delays experienced in debt recovery and the direction issued by the Central Bank in August 2003 amending the basis for computing the mandatory minimum provisions to be effective from 1 January 2004."

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