DFCC.N0000 ( DFCC BANK PLC )

Among the licensed commercial banks DFCC seems to be a risk adverser or very careful in granting.



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Dividends are slowly growing for DFCC shareholders and a special gift of a table clock was delivered this time .

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Even though DFCC is a commercial bank it lies in par with PLC.N regarding Revenue.

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and PAT

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2018

Revenue and PAT of the bank.

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If we compare the performance of Sampath Bank and DFCC we can see the clear difference between the strategies. 2018 was a tough year. Drought, Floods, Political uncertainties, Rising USD or drastic depreciation of Rupee affected badly.

Sampath Bank grew aggressively amidst all the challenges and DFCC shrunk being very conservative.

The Board considered it prudent to be somewhat conservative in our outlook and lend judiciously rather than grow aggressively.

Chariman's message- Annual Report 2018

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Shareholders are much worried about the decline of PAT  37% on YoY basis.

The justification of the drop.

 1. 2017 PAT includes an exceptional gain of LKR 917 Mn by selling of shares.

2.  2018 PAT includes fair value provision of LKR 871 Mn and LKR 231 Million in Debt Repayment Levey.

This debt repayment levy would wipe off some part of shareholders, specially dividend hunters interest from the banking sector.

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Directors have approved a dividend of 3.50 which is 35% of distributable profit.

This is in line with the Dividend payout of SAMP as well.

The contradicting view similarly to SAMP here as well.

Shareholders will appreciate the need to build up capital while ensuring shareholders get a fair return.

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DFCC has declared a rights issue, 2:5 at 72. When market is bombed by Rights DFCC justifies its call.

Unlike most of our peers, we are making this call after 12 years.

Rights issue has given a good opportunity when considering Net Assets per Share.

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Capital adequacy which persuade banks to call for Rights issues.

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Thanks YK

Thank you YK for banks updates.
Banks have given a good chance for patient investors.

Thanks YK.

Thanks YK for invaluable information.

Not sure this is the right move at the point.

DFCC will ‘bite the bullet’ says Chairman C.R. Jansz Rights issue will proceed despite market price being below Rs. 72 rights price

DFCC Bank PLC will "bite the bullet" and proceed with its two for five rights issue despite the bank’s share declining below the Rs. 72 issue price, DFCC Chairman C.R. Jansz told shareholders at an Extraordinary General Meeting held on Thursday immediately after the bank’s AGM.


Only one shareholder among nearly a 100 physically present recorded his objection to the resolution approving the rights issue although Mr. Ravi Thambiayah of the Renuka Hotels Group who with related parties have a substantial holding in DFCC asked whether "there would be a problem" if the issue is postponed in the light of current stock market developments.


Although Jansz said there would be no problem from the regulator and the CSE in such an event, he indicated that the bank would proceed with the issue intended to raise over Rs.7.63 billion new equity capital to support the bank’s asset growth and also for is lending activities.


He said that the directors held proxies in respect of 81% of the bank’s shares at yesterday’s meeting and DFCC CEO Lakshman Silva had discussed the issue with the big shareholders. He himself had talked to one foreign shareholder who was reluctant to subscribe to his entitlement in the light of the share price falling below the issue price.


But after hearing Jansz he had decided to take up his entitlement.


However one big shareholder interviewed by the Sunday Island confirmed that although they had agreed in principle to take up their entitlement said that they would make their call depending on what the secondary market price was when the issue closed.


The DFCC share closed on Friday at Rs. 70 with 21,519 shares traded in 25 transactions between Rs. 69.50 and Rs. 71. The share has fallen below the rights issue price several times in the last few days.


Jansz said that when his board took the rights issue decision and announced it, the share was trading at Rs. 89.10 and in deciding on the Rs. 72 price, a 19% discount was offered to shareholders. There was also a 52% discount on the net asset value (NAV) per share.


Thambiayah who said "nobody looks at NAV" also made the point that the recent rights issue by the NDB bank where too the share price declined below the issue price in a falling market had failed with only about 50% of the entitlements subscribed,


Jansz made the further point that the bank had made no cash call on its shareholders for 12 years and had during the period (in 2010) shared a portion of its reserves amounting to Rs. 1.3 billion with its shareholders. The DFCC had paid healthy dividends over the years and was possibly the only bank making its distribution by way of a cash dividend only with no scrip dividends.


He said the dividend stream, bonus etc. had given the shareholders an average 10% return which matched the Treasury Bill rate favourably.


In a circular to shareholders, DFCC said that "over the past few years, the bank had been able to grow its assets through a judicious combination of debt and internally generated funds." Looking ahead, based on the medium term projected growth plan an asset base of over Rs. 500 billion and above is to be achieved by 2021" to become a "systemically important domestic bank."


He stressed "we are doing something that’s good for our bank" through the rights issue. Asked by Thambiayah, whose daughter Shibani, sits on the DFCC board representing a substantial shareholder interest, whether they had a back-up plan if they failed to reach the target aimed for, Jansz said ‘No’.


"We can progress but not the way we want," he said.


Asked whether the DFCC was exploring a possible merger with any other financial institution, the chairman ruled the question was outside the agenda and gave no reply though he told the questioner that he might say something if he was approached outside the formal meeting.


The biggest shareholders of DFCC are the Bank of Ceylon (14.35%), HNB (12.22%), Sri Lanka Insurance Corp. (10%), Mr. M.A. Yaseen (10%), EPF (9.19%) and Melstacorp (8.36%). The Ravi Thambiayah interests through Renuka City and Renuka Hotels, Cargo Boat Development, Crescent Launderers and Dry Cleaners and Renuka Consultants and Services total over nearly six percent.

DFCC priced rights issue at a 56-pct discount to NAV to attract shareholders: CEO

Apr 08, 2019 (LBO) – Chief Executive Officer of Sri Lanka’s DFCC bank says that they wanted to make the rights issue attractive to shareholders by providing a discount of 56 percent to the net asset value per share.

The bank is to issue up to 106,039,075 ordinary shares to the existing shareholders in the proportion of two shares for every five shares held as at end of trading on 28 March 2019.

The rights issue has been priced at 72 rupees per share when the net asset value per share as of December 31, 2018, is 165.40 rupees.

“At the time of deciding the price of Rs.72.00 per share, the market price was Rs.89.10,” CEO of the bank, Lakshman Silva said.

“We considered a 19.2% discount to the prevailing market price to be reasonable considering the share price movement at that time and in the context of the Rights Issues of other Banks which were also issued at a similar discount,”

The share, however, closed at the Colombo Stock Exchange at 71.20 rupees per share, last Friday.

“The Directors also considered that a discount of 56% to the net asset value would make the rights attractive to shareholders,” he said.

Silva anticipated that the bank will become a systemically important domestic bank in the near future.

Full statement: Lakshman Silva, CEO of DFCC Bank on the Bank’s latest Rights Issue

1. Why do you think it is necessary to go for a Rights Issue at this time?

The main objective of this Issue is to increase the Tier 1 Capital of the Bank in order to accommodate and support the Bank’s future business expansion and continue our well-established franchise of being the premier provider of project financing for the country.

Over the past few years, DFCC has been able to grow its asset base through a judicious combination of debt and internally generated funds. Looking ahead, based on the medium term projected growth plan, an asset base of over LKR 500 billion and above is to be achieved.

DFCC will become a systemically important domestic bank in the near future. As such, we will require a Tier 1 ratio of 10% to be maintained. Also, in order to sustain our present position as the premier project finance lender in the country, we will need to enhance our equity capital which is currently quite low when compared to our peers as we have not requested shareholders for capital for well over a decade.

2. Why is it priced at Rs. 72.00 when Net Asset value per share as at December 31, 2018, is Rs. 165.40?

At the time of deciding the price of Rs.72.00 per share, the market price was Rs.89.10. The directors considered a 19.2% discount to the prevailing market price to be reasonable considering

• the share price movement at that time and
• in the context of the Rights Issues of other Banks which were also issued at a similar discount.

The Directors also considered that a discount of 56% to the net asset value would make the rights attractive to shareholders.

3. What benefits are there for shareholders when they subscribe for the Rights Issue?

The last time we requested shareholders to provide capital was in 2007, 12 years ago. Since then, the Bank has given 1:5 and 1:1 Bonus Issues. This, combined with the dividends paid annually, entirely in cash, has resulted in substantial returns to shareholders, when averaged over the period, represents a return on investment more or less on par with the average return that could have been earned had such funds been invested in time deposits or treasury instruments. In addition, the return for DFCC shareholders was free of tax.

Furthermore, shareholders will receive excellent value for their new investment when the current depressed stock market recovers.

4. What are the plans and where does DFCC expect to be over the next few years?

After becoming a commercial bank in 2015, DFCC has been aggressively moving towards acquiring new retail and corporate customer and focusing on introducing digitally enhanced products and services, for the convenience of its customers.

With these new initiatives, the bank will become a systematically important bank in the near future in line with our plans.

5. Do you intend to approach Shareholders after a few years for future capital?

No. Should shareholders support the Rights Issue in full, there will be no need for a further infusion of shareholder capital in the immediate future.

6. Do you have any other comments for shareholders?

Shareholders approved the Rights Issue at the Extraordinary General Meeting held on the 28th of March, and the provisional letters of allotments have been posted to the shareholders on the 4th of April. The applications should be submitted no later than the 22nd of April.

Shareholders have always supported DFCC over our 64-year history and we are certain that they will continue to do so. On behalf of the bank, I assure you that my team and I remain fully committed to ensure the stable and steady growth of DFCC bank in the years ahead.

DFCC was traded below the RI price. But somebody got their hands on it. There was a purchase of approx 6.8 Mn rights on 13th

Revised date for acceptance and payment of Rights

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Financial Performance- Period ended 31 March 2019

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DFCC Bank profits down 20-pct in June quarter

ECONOMYNEXT - Profits at Sri Lanka's DFCC Bank group fell 20 percent to 271 million rupees in the June 2019 quarter from a year earlier as bad loans picked up, despite gains on forward contract, interim accounts show.

DFCC group reported earnings of 1.06 rupees for the quarter. For the six months to June the group reported earnings of 3.28 rupees on total profits of 869 million rupees, which were down 39 percent.

The stock closed up 1.30 rupees at 99.30 rupees Tuesday.

Group interest income grew 15 percent to 10.7 billion rupees, interest expenses grew at a faster 17 percent to 7.62 billion rupees and net interest income grew at a slower 9 percent to 3.1 billion rupees.

Loans grew 5 percent to 262 billion rupees from December to June. Deposits grew 3 percent to 248 billion rupees.

Loan losses grew over four fold to 480 million rupees from 80 million rupees from a year earlier.

At bank level the gross non-performing loan ratio grew to 4.63 percent in June from 3.28 percent in December.

There was a 552 million rupee fair value gain while other operating income recorded a loss of 1.1 billion rupees in accounting for forex swaps.

Fee and other income were flat at 476 million rupees.

Gross assets grew 7 percent to 402 billion rupees from December to June. Net assets grew 4 percent to 47 billion rupees. Total capital adequacy was 16.5 percent against a requirement of 12.5 percent. (Colombo/July31/2019)

2020

The banking sector annual reports are coming out. DFCC  bank has recorded a stable growth in Revenue.


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PAT of the company remains almost in the same level for a longer period.

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However 2017 has been a remarkable year for DFCC in PAT and the same is noticed in BOC.

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If we forget the sudden PAT growth in 2017 and 2011 , BOC is rather growing in PAT where DFCC remains in a plateau.

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As a longtime investor I look at the Dividend Growth of a company. Lethargic PAT will not motivate a firm to grow in Dividends.

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ROE is another Ratio an investor is interested and again the trend is not supportive .

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Good work YK. Please keep it up. These days we hardly see direct stuff relating to listed stocks and would love to read any like this.

Very few companies shows profit per employee as a ration. However for a bank as well as for many companies No 1 cost becomes employee salary. The second is building rent. When we see stable growth in PAT we see a sudden slab up in Number of employees.

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Who should analyze these information?

It is the owner. Theoretically its us the shareholders. Yet practically its the guy/family that runs the business.

Regarding the ownership a nice statement appears.

58.1 Parent and ultimate controlling party.

The Bank does not have an identifiable parent of its own.


Now the problem is why there was a sudden interest in recruiting employees. If its to expand by opening more branches its justifiable. If not to get the same PAT , or Revenue what is the point of recruiting more and paying salaries.

That is the view point of an investor. But there can be other perspectives like provide more jobs.

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Chairman's message answer the two questions.

1. Why PAT is not growing YoY basis?

Due to fair value loss recorded on the equity trading portfolio.

2. Why Do you recruit so much ?

In December 2019 we opened 20 new Branches in 30 days in key locations island wide.

If so we have  to wait to see the results...

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