Land Bank reports strong cash position at the end of its half year

The Land and Agricultural Development Bank of South Africa reported a R172 million loss for the six months to September 30. Picture: Karen Sandison/African News Agency(ANA)

The Land and Agricultural Development Bank of South Africa reported a R172 million loss for the six months to September 30. Picture: Karen Sandison/African News Agency(ANA)

Published Jan 1, 2021

Share

CAPE TOWN - The Land and Agricultural Development Bank of South Africa, which was bailed out by the government in 2020 after it defaulted on debt, reported a R172 million loss for the six months to September 30.

The interim loss is an improvement considering that in the year to March 31, 2020, the bank reported a R2.8 billion loss following challenges that included a credit rating downgrade, deteriorating book quality, low liquidity, a weak economy, several livestock diseases, drought in many areas and many resignations of key bank staff.

The Land Bank said on its website on Thursday that interest income declined to R223 million in the interim period (R651.1m at year-end), due to margin compression, higher cost of funding due to the credit rating downgrade and due to the declining gross loan book.

Some R73m of impairments were reported, while operating expenses amounted to R272m.

However, following the R3bn recapitalisation of the bank from National Treasury, as well as collections from customers and lower disbursements, the cash reserves at the end of the six month period stood at R7.3bn, while investments stood at R2.2bn.

Total capital adequacy, including government guarantees, was 16.8 percent.

Gross loans and advances decreased to R41.2bn from R45.3bn at March 31 due to constrained disbursements and repayments.

The large cash on hand position was earning interest significantly below the cost of funding, the bank said.

Most of the cash would be used for future loan disbursements or the repayment of funding, and was excluded from risk weighted assets.

The non-performing loan (NPL) ratio was 19.5 percent at the end of September, up from 18.1 percent at the 2020 financial year end, and well up from the 9.6 percent in 2019.

In October the bank announced a revision of its strategy to improve its services and financial performance, which included building on its technological strengths, improving cost and profitability management, expanding the bank’s developmental mandate and taking steps to diversify its revenue streams.

BUSINESS REPORT ONLINE

Related Topics: