DFCC Bank’s (DFCC) 4QFY12 Report

Sstar Wed Jun 13, 2012 12:17 pm

DFCC Bank’s (DFCC) 4QFY12 core PPoP (excluding dividend income and gains on investment and dealing securities) increased 3% YoY. Core net income increased 16% YoY primarily due to the accelerated credit growth over the past 12 months (up 46% YoY). NIMs/spreads contracted owing to competitive pricing policies adopted for new customer acquisitions, particularly in the corporate segment. Gross NPLs (net of suspended interest) declined to 4.3% in 4QFY11 vs 4.4% in 3QFY11, despite increasing interest rates. Intermediation costs increased due to seasonally-high personnel costs, but otherwise broadly on par with the normalised rate. We believe the bank is likely to find it difficult to maintain NIMs in the short to medium term. While we expect benefits in the form of higher volumes from both fund and fee-based activities to accrue from new customer acquisitions; the slowdown in economic growth and the import/export sector coupled with regulator’s imposed ceilings on credit growth will likely result in a possible time lag for the pay-offs to materialise. REDUCE.

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