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DBH Finance secured a remarkable 40 per cent year-on-year growth in profit to Tk 333 million in the third quarter (Q3) this year, riding on substantial investment income from government securities.
The earnings per share (EPS) jumped to Tk 1.68 for July-September this year from Tk 1.20 for the same quarter last year, according to a stock exchange filing on Sunday.
The leading non-bank financial institution (NBFI), which mainly caters to the demand for home loans, reaped handsome profits from investments in government securities alongside high interest income although interest expenses on deposits increased too.
While interest income grew 22 per cent year-on-year to Tk 1.93 billion in the quarter through September, interest payment to depositors and lenders soared 38 per cent to Tk 1.55 billion.
The net interest income dropped 18 per cent year-on-year to Tk 376 million in the July-September quarter.
DBH Finance's average interest spread narrowed to 2.32 per cent in the third quarter this year from 2.54 per cent in the same quarter last year. That means the profit growth was driven by higher investment income.
Higher gains from government securities supported the company's impressive earnings growth in an adverse business climate amid inflationary pressure.
The company's income from investments, particularly from the government securities, climbed 5.36 times year-on-year to Tk 226 million in the third quarter through September.
To take advantage of the rising interest rate regime, DBH Finance increased investment in government securities by Tk 2.85 billion in Q3 to Tk 10.05 billion, according to its unaudited financial statements.
The yield rates of T-bonds ranged between 12 per cent and 14.80 per cent, with maturity periods of 2-20 years, while T-bills' yields varied between 15 and 15.2 per cent during the July-September quarter.
The financial institution's income in the form of exchange and brokerage commission also surged 21 per cent year-on-year to Tk 41 million in the quarter.
DBH has always been able to keep operating costs down and mobilize funds at relatively lower costs due to its excellent market reputation, which enabled the company to remain competitive in the market, said an official of the company, requesting not to be named.
Lower provisioning against capital market investments also helped the company to secure a higher profit as its unrealized loss fell for the price hike of selective blue chip stocks after the ouster of the Hasina-led government.
Stock prices of blue chips, such as Square Pharma, Grameenphone, BRAC Bank, and Islami Bank, surged 9 per cent-100 per cent during the July-September quarter this year.
NBFIs are required to keep 100 per cent provision against unrealised losses in stock market investments.
"The management remains optimistic about DBH's continued growth momentum, anticipating healthier profits in the quarters to come," he added.
DBH Finance's nine-month profit also grew 1.80 per cent year-on-year to Tk 741 million in January-September this year, although interest payment on deposits & borrowing jumped 39 per cent to Tk 4.24 billion during the time, compared to the same period a year earlier.
The net operating cash flow per share, a measure of a company's ability to generate cash from its operations, turned Tk 7.45 in the negative in January-September this year, which was Tk 43.18 in the third period of the year before.
The company explained that cash flow had dropped due to a significant rise in loans & repayments to clients and banks during this period.
DBH's loan disbursement rose to Tk 44.16 billion in September this year from Tk 43.66 billion in December last year, while fixed deposit declined by Tk 1.88 billion to Tk 44.78 billion during the time under review.
Since the inception in 1996, the company gained a commendable growth in creating home ownerships in the country by providing loans for construction of houses, purchases of flats or homes along with various investment instruments and financing products for corporate and individual clients.
Last year, DBH Finance introduced Shariah-compliant deposit schemes and housing financing products and services in all of its 16 branches located in major cities of the country simultaneously, alongside existing operations.
Following the earnings disclosure, the stock rose 1.65 per cent to Tk 37 per share on the Dhaka Stock Exchange on Sunday.
Its 2023 annual profit slid 3 per cent year-on-year to Tk 985 million and the company paid 15 per cent cash dividends for shareholders.