Time and demand deposits expanded by 16.2% and stood at Rs 22,047 million at the end of the year. The balance sheet growth was mainly driven by expansion of the liability base which reflects the confidence placed by the public in the stability of the Bank. As a result, the Bank remained excessively liquid with the advance to deposit ratio reaching 68% by the end of 2009.
The growth in the profits of the Bank is particularly noteworthy in a very challenging year. The profit before tax amounted to Rs 780 million while the profit after tax was Rs 268 million. The effective tax rate for the year has been 65.6%, which is above the banking industry average. One reason for this high rate of taxation is the ceiling on the loan loss provision to 1% of the lending portfolio for income tax purposes.
The net profit of 2009 amounts to a return on equity (ROE) of 9.8%, whereas the ROE of 2008 was only 4.3%. A major cause for the increased profitability was income from Treasury operations in the context of reduced lending activities. The nonperforming asset ratio stood at 10.8%, as the debt service capacity of the customers suffered from reduced demand across the economy.
The cost income ratio remained at 48.3% despite increased recurrent costs relating to increased number of branches and customer service outlets. However, profit after tax of Rs 268 million is 41% higher than the budgeted profit of Rs 190 million for the year.
The Bank has increasingly started to use more information and telecommunication technology solutions to reach out to customers in a cost effective manner. DVB's credit cardholders can now access the Bank through the global Visa network. With the launch of the mobile banking solution, the field staff of the Bank is able to conduct transactions from the residences of customers. Further incentives will be provided for customers to use this electronic network for their convenience.
During 2009, the Bank added six branches and 25 extension offices (EO) at Sri Lanka Post Offices to its physical distribution network during the year. The EOs gives DVB the ability to reach into new areas, making their services more accessible. DVB also entered into an ATM sharing agreement with a commercial bank which expanded customers' access to its services. Similarly, DVB linked-up its banking network with the Visa International global network, giving credit cardholders the ability to use the global Visa ATM network.
"We anticipate growing our banking business significantly in 2010, with the emerging positive outlook in the political and economic environment in the country," said Lakshman Silva, CEO, DFCC Vardhana Bank.
In this light, DVB's main emphasis lies with creating a significant presence in the North and Eastern provinces, which lag behind other parts of the island in terms of infrastructure and socioeconomic development. The establishment of four more branches and 45 EOs is also planned for 2010.
DFCC Vardhana Bank has 73 branches and extension offices including Ambalangoda, Ambalantota, Anuradhapura, Avissawella, Badulla, Bandarawela, Beliatta, Borella, Chilaw, Colombo, Dambulla, Deniyaya, Galle, Gampaha, Gangodawila, Gampola, Hambantota, Horana, Kaduruwela, Kalawana, Kotahena, Kottawa, Kuliyapitiya, Kurunegala, Kalutara, Kiribathgoda, Katugasthota, Kadawatha, Kandy, Matale, Maharagama, Malabe, Matara, Nawala, Negombo, Nugegoda, Nuwara Eliya, Panadura, Piliyandala, Peradeniya, Ratnapura, Tangalle, Wattala and Wellawatte.
DVB also has a postal-unit network of twenty-six. The bank's customers at all branches have access to a full range of commercial and personal banking services, including current ccounts, savings accounts, fixed deposits, foreign currency accounts and trade related finances.
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