The DFCC Group is gearing to capitalise on the North and East revival by starting operations in these areas, the company said. "We have applied to and got Central Bank approval to start five branches in Batticaloa, Amparai, Jaffna, Vavuniya and Trincomalee," Nihal Fonseka, CEO, DFCC told the Sunday Times FT.
Nihal Fonseka |
He explained that generally the saving habit in the peninsula is good and that DFCC Vardhana hopes to mobilize a lot of the Diaspora funds thereby increasing deposits mobilization. "But when it comes to the loan situation, it is slower (than deposit mobilization) and we may have to start from micro-finance type advances," he said, noting that DFCC will be focusing on construction, fisheries and agricultureal areas before industrial lending that will be financed from DFCC's access to longer term funds.
He said the level of inquiry for project finance is better now than some months ago from all over the country. "We feel that next year the demand (number of inquiries) and disbursements will be much better as there is a time lag when it comes to project lending disbursements." During the first quarter of this financial year, DFCC recorded a net interest income of Rs. 1.163 billion, up by 27% supported by a 13% increase in interest income.
Specific provisions increased by a staggering 103% to Rs 210 million and general provision declined marginally. DFCC Group’s operating profit before taxes and net profit recorded was Rs. 675 million (unchanged from the previous year) and Rs. 507 million respectively. Profit of the equity holders for the first quarter stood at Rs. 479.75 million recording a negative growth of 6.8%. “The economic downturn which took place and the very high interest rate regime that prevailed until recently had an adverse impact on many business sectors resulting in a reduction in the demand for capital asset funding. As a result DFCC has adopted a more cautious approach towards portfolio growth during the last financial year and was more focused on following up and monitoring of their present portfolio,” Mr. Fonseka noted.
He said that the ‘stressed’ (difficult) economic conditions caused the portfolio to deteriorate during the last financial year.
The Non Performing Asset (NPA) ratio increased to 9.1% from previous year’s 6.2%. This adverse variance was mainly due to an increase in non performing facilities in the small and medium portfolio, for both loans and leases. The consequences from the reduction in the portfolio size also contributed to the increase in the ratio. Mr. Fonseka said last month DFCC saw a slight reduction in NPAs.
"In the whole banking system in the country NPAs climbed from Rs. 100 million to Rs. 144 million billion from January to May 2009, but in June and July it has reduced a little.
As a result in this scenario DFCC has had to adopt a more cautious approach towards portfolio growth during the last 12 months and was more focused on following up and monitoring of the existing portfolio. I am cautiously optimistic that with the interest rates down, our asset quality will improve by the year end," he added. |
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