Home | News | ESWATINIBANK MAKES E64M LOSS

ESWATINIBANK MAKES E64M LOSS

03/09/2020 01:51:00 BY WELCOME DLAMINI

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MBABANE – The COVID-19 pandemic is really biting hard on businesses and institutions and it is showing; the EswatiniBank being one of those that has been hit hard by the pandemic.

The bank has recorded a loss of E64.191 million in the financial year ended March 31, 2020 and it attributes this slump mainly to COVID-19 related impairments.

According to the bank’s abridged financial statements, the impairments amount to E102.373 million and they comprise COVID-19 relief of E30.418 million, GDP contraction impact of E55.607 million and normal loan impairments totalling E16.348 million.

This represents a loss of 214.5 per cent compared to the previous year (ended March 31, 2019) where the bank recorded a profit of E56.083 million, which had also been preceded by a profit of E42.873 million during the financial year ended March 31, 2018.

“A significant component of the impairments is in respect of the likely effects of the COVID-19 pandemic. The lockdown and reduced business activity have impacted on a number of customers and sectors of the economy,” the bank said in its statement released yesterday.

Repayment holidays factor

EswatiniBank said as part of its response initiatives, it provided repayment holidays to a number of customers with loans totalling E136 million. “The bank had to raise impairments for the respective loans, over and above the normal impairments,” the statement further reads.

The bank has stated that the largest impact, however, came from the projected contraction of Gross Domestic Product (GDP) as announced by the Central Bank in March 2020. “For reporting purposes, the bank had to factor the GDP projections into the IFRS 9 model, and this resulted in significant impairments. The bank expects to write these impairments back, should there be an improvement in economic activity,” the statement states.

The bank anticipates a reversal of these impairments, subject to the improvement of economic conditions. The IFRS 9 (International Financial Reporting Standards 9) requires firms to take account of future expected credit losses (ECLs) to calculate provisions for their financial instruments, investment portfolios, loan books, and trade receivables. This change requires the use of forward-looking analytics.

EswatiniBank said due to its lending book having been significantly impacted, it had to raise impairments in line with the forward-looking IFRS 9. “The projected contraction in GDP and the specific COVID-19 relief measures extended to customers are some of the factors that have contributed to the adverse year-end performance,” said the bank.

Meanwhile, the bank said gross loans and advances increased by 9.3 per cent (E147.405 million) from E1.580 billion in the previous year to E1.728 billion in the current year.

Portfolios that contributed to the loan book’s growth have been listed as corporate business, housing, agriculture, asset finance, personal loans and SMME. “Loan provisions (impairments) increased by 46.1 per cent due mainly to the likely impact of COVID-19. As a result, the net loan book increased by 4.3 per cent. The bank continues to monitor the loan book performance closely,” the bank said.

Funding balances (customer balances and long-term borrowings), are reported to stand at E1.568 billion after experiencing a decrease of 7.3 per cent (E122.570 million) during the year. “Outflows were experienced in both borrowings (normal facility repayments) and customer deposits (normal customer withdrawals),” said the bank.

Gross income up E19.75m

Gross income generated during the year is reported to have amounted to E376.110 million, reflecting an increase of E19.750 million from the E356.360 million realised in the previous year. “The growth is mainly driven by interest income, in line with the growth in the gross loan book,” the bank further stated.

The bank said it had generated net interest income amounting to E145.091 million, which reflects an increase of 4.4 per cent from E138.720 million generated in the previous year.

Net interest income is a financial performance measure that reflects the difference between the revenue generated from a bank’s interest-bearing assets and expenses associated with paying on its interest-bearing liabilities.

A typical bank’s assets consist of all forms of personal and commercial loans, mortgages and securities.

The liabilities are interest-bearing customer deposits; the excess revenue that is generated from the interest earned on assets over the interest paid out on deposits is the net interest income. “The growth is in line with the growth in the gross lending book, and has been partly offset by a reduction in investment income. Interest expense increased by 8.3 per cent and is a reflection of the high cost of funds,” stated the bank.

Non-interest revenue generated during the year is reported to amount to E135.494 million, an increase of 4.7 per cent from the previous year’s E129.431 million. The bank reported total operating expenses of E252.539 million, an increase of 13.4 per cent from the E222.675 million incurred the previous year.

Major increases have been listed as IT licences and support fees, digital support banking fees and once-off data clean-up costs following a system upgrade. In terms of future outlook, the bank said it had put in place a number of strategies to help respond to the COVID-19 pandemic and was looking forward to a turnaround in economic activity and in the institution’s own performance in the coming year.

The bank said it had upgraded its core banking system and also enhanced the digital banking platform. It said a number of digital banking projects were being completed and would be rolled out before the close of the calendar year, something that is expected to help enhance customer service.