DFCC Bank has continued to aggressively pursue its role as a commercial bank by strengthening its core business, creating momentum in the industry with its constantly evolving best in class offerings and creating a culture of service amongst its people, Director/Chief Executive Officer, DFCC Bank, Lakshman Silva said.

DFCC Bank, the largest entity within the group recorded a profit after tax (PAT) of LKR 2,828 Million for the year ended 31 December 2019 excluding the fair value loss on Commercial Bank of Ceylon PLC (CBC) in comparison to profit after tax of LKR 3,646 Million recorded in the comparative year. The Bank’s profit after tax with the fair value loss on CBC shares amounted to LKR 2,074 Million for the current year against LKR 2,768 Million in the comparative year. The Group recorded a profit after tax of LKR 2,300 Million for the year ended 31 December 2019 compared to LKR 3,070 Million in the comparative year. Decline in PAT is mainly due to the increase in impairment and taxes on financial services. Taxes on financial services increased to LKR 1,548 Million due to Debt Repayment Levy introduced during last quarter of 2018.

NII and fee income

Notwithstanding the turbulent environment in the country, the Bank recorded a LKR 12,662 Million in net interest income (NII) which is a 2% growth YoY. This NII Growth was possible even after Bank meeting the conditions stipulated by Central Bank of Sri Lanka to reduce the lending rates by 250 basis points by December 2019 compared with the rates applicable in April 2019. Net fees and commission income grew by 5% to LKR 2,046 Million as a result of the concentrated effort to increase non-funded business for the year ended 31 December 2019 from LKR 1,944 Million in the comparative year.

Operating Expenses

As a part of its growth strategy, DFCC continuously invests in its organization and infrastructure. The bank increased its island wide footprint by commencing 20 full service branches in 30 Days. DFCC enhanced its delivery channels through core banking upgrades and the introduction of pioneering, digitally enabled products. The bank also continued to invest in its brand and franchise, to enhance top of mind awareness and greater customer engagement for the bank with the objective 2 of increasing a higher footfall. The outlay of these investments resulted an increase in operating expenses to LKR 7,573 Million from LKR 6,604 Million in the comparative year, which expects to generate positive results to the Bank in the short to medium terms.

Impairment

The overall impairment provision increased due to adverse business environment faced by most industries. As a result, the impairment provision during the year under review increased to LKR 1,669 Million, compared to LKR 1,056 Million recorded in the comparable year. The Bank’s NPL ratio as at 31December 2019 increased to 4.85% compared to 3.28% recorded at the end of previous year. NPL in the banking industry also recorded an increasing trend from 3.4% in 2018 to 4.7% as at 31 December 2019.

Other Comprehensive Income

Investments in equity securities and treasury bills and bonds (fixed income securities) are classified as financial assets and the change in fair value is recorded through other comprehensive income. Accordingly, fair value losses of LKR 1,564 Million and a net fair value gain of LKR 2,126 Million were recorded on account of equity and fixed income securities, respectively. The drop in the share price of Commercial Bank of Ceylon PLC during the period mainly contributed to the reported fair value loss in equity securities, whilst the movement of interest rates of treasury bills and bonds favourably resulted in the fair value gain that was recorded during the period.