DFCC invests in IT company

DFCC Bank last month invested Rs 20 million in Synapsys Ltd – an IT services company, the bank said this week.

Releasing the results of its 6-month performance in September 2007, the bank said its new wholly owned subsidiary while providing IT services and support to DFCC Bank and DFCC Vardhana Bank (DVB), will gradually widen the scope of its activities to generate new revenue leveraging on its inherent skills based strengths.

Nihal Fonseka, the bank’s General Manager/CEO, said the non-audited group profit after tax for the six months ended 30 September 2007 was Rs 1,131 million, up 34 percent over the Rs 841 million in the previous comparable (April to September 2006) period.

He said funds from the fully subscribed Rights Issue (net of investment in Commercial Bank of Ceylon Limited and a credit line from the European Investment Bank enabled the bank to reduce its dependence on high cost short-term customer deposits that were resorted to in the first quarter as an interim financing measure.

The reconstitution of the liabilities with a lower level of short-term customer deposits enabled the bank to improve the annualized interest margin from 3.6 percent in the first quarter to 4.7 percent in the second quarter and 4.2 percent for the full half year.

Gross approvals during the current period was Rs 7,158 million, down 21 percent from Rs 9,043 million in the comparable period. “Approvals and draw down for capacity expansion, modernization of existing entities and new ventures that constitutes the core business slowed down somewhat under the tight monetary policy stance adopted by the Central Bank to control credit expansion and high inflation,” Fonseka said in the statement.

The current period includes a charge of Rs 89 million imposed by the Central Bank by way of a general provision for advances.

The non-performing loans and advances as a percentage of the total loans and advances were 7.3 percent at September 30, 2007, a marginal increase from 7.2 percent recorded on June 30, 2007. The bank’s efforts to contain the non-performing loan exposures were satisfactory in an environment of high interest rates that resulted in increased working capital requirements of borrowers thereby reducing their debt servicing capacity. DVB, Fonseka said, was also adversely affected by the interest rate and liquidity volatility while benefiting somewhat from exchange rate volatility.

DVB’s combined Profit before Income Tax of the two entities increased by 12 percent to Rs 1,010 million in the current period compared to Rs 900 million in the previous comparable period.