Ayanda Mdluli
The Land Bank, which only returned to profitability last year, continued its positive run this year by boosting profit from core operations by 26 percent. It has also grown the loan book by R1.5 billion since April.
Lebogang Serithi, the bank’s chief financial officer, said yesterday that the results could be partly attributed to the drought conditions in the US, which had sent global grain prices to record highs.
Impairment releases came in at R3.5 million this year, compared with R125m last year.
The state-owned lender has forecast a subdued global economic outlook with an agricultural sector pressurised by adverse weather conditions, which might have an effect on the bank’s financing processes.
The Land Bank acquired 55 percent of the lending book of Afgri’s Grocapital division in September last year.
The lending book is valued at more than R3.3 billion and since the acquisition, the bank has increased its lending book by as much as 3.7 percent.
The Land Bank’s non-performing loans fell to 6.4 percent of its total loan book from 11.1 percent in the year before.
To date the bank had disbursed R752m in financing for emerging farmers, surpassing its target of R450m.
Some of the objectives the lender had to achieve within the next four years were to garner market share of about 35 percent and increase its debt book by as much as 15 percent – or by R5bn.
Serithi said the bank would see some benefit from the US’s worst drought in more than 50 years, as a number of its clients might increase their credit facilities. The impact on financing of record high grain prices would vary as some farmers used yellow maize and wheat as inputs. However, most agribusinesses had diversified their operations so their grain activities would do well.
The bank faced a tricky micro operating environment with average net farming income pegged at R30m and mean farming debt at R80m.
To ensure a sustainable ratio of farming income to debt, Serithi said loans were provided on the basis that a farmer was involved or reintegrated into the agricultural value chain to minimise risk.
“We will continue to put an effort (into) clients in distress. We have established linkages and created partnerships with clients in distress and those (who) are doing well,” he said.
He added that the bank would begin to explore opportunities in southern Africa, although this strategy was still being discussed with the bank’s principals at the National Treasury.
Overall, the bank forecast adverse weather conditions to continue in key areas of production. Moves in agricultural commodity prices and energy markets would affect inputs such as fuel and fertiliser.
Food prices would also continue their upward trend, while net farm income was projected to remain fairly stagnant in 2013, Serithi concluded.