Development finance institution the Land Bank reported a 54.5% jump in its performing loan book during the year ended March 2012, which was further strengthened by a 17.6% drop in nonperforming loans, CEO Phakamani Hadebe said on Thursday.
Speaking at the group’s financial results presentation, he noted that the agricultural finance bank’s performing loan book increased from R13.6-billion in 2011, to R21-billion in 2012. Nonperforming loans fell from R1.7-billion in 2011, to R1.4-billion this year.
The Land Bank’s business and corporate banking (BCB) division accounted for R17.3-billion of the performing loan book value, a jump from R10.6-billion the year before, while its nonperforming loans contributed R528-million during the year ended March 2012, down from R658-million in the corresponding period.
The retail commercial banking (RCB) division held R3.6-billion in performing loans, up from R2.9-billion in 2011, and a current R901-million in nonperforming loans, an improvement from R1-billion the year before.
Excluding a R137-million impairment that impacted on the group’s 2011 profit margins, the bank, which was celebrating its centennial this year, experienced 26.6% profit growth to R161.4-million, said CFO Lebogang Serithi.
The BCB division, which accounted for 73% of the banks assets, recorded an income increase to R164.9-million for the 2012 financial year, compared with the R10.1-million earned in the previous year, he commented.
The RCB division earned the company R31.1-million – a fall of 88.4% compared with the R267.8-million recorded in 2011.
The bank’s newest division – Retail Emerging Markets (REM) – reported a R3.7-million loss. REM was a dedicated banking division for emerging farmers with no other access to finance.
Finance Minister Pravin Gordhan commended the group on its performance, noting that the bank was making strides and a significant impact in helping to grow the economy to assist government in achieving its strategic economic aims.
The Land Bank, following a number of turbulent years, was now on solid operational footing and its finances were healthier after implementing a ‘fit for future’ project last year to refocus the group, said Hadebe.
The project targeted an internal process consolidation, which aim to deliver a predictable and enhanced customer interaction process, ensure a greater impact from development finance, create a sustainable delivery channel network and direct a growing business based on clear, achievable goals.
Further, as part of the company’s medium-term ‘2016 corporate landscape’ plan, the Land Bank planned to claim a 35% market share over the next five years, which Hadebe believed would enable greater savings for farmers owing to the bank’s below-average interest rates. The bank also aimed to push its development-funding portfolio to R5-billion, from its current R752.2-million, which comprised R101.7-million, R122.4-million and R528.1-million from REM, RCB and BCB respectively.
The Land Bank, which claimed to have created 13 335 jobs and maintained another 240 800 during the year, expected to create 110 000 new jobs and maintain another 250 000 over the next five years.
The group believed that for every R1-million disbursed to and spent in the agricultural sector, about 10 jobs were maintained or created in many different industries, such as manufacturing and distribution, as a result.
This estimation was based on the South African Social Accounting Matrix model, which was piloted in conjunction with the Development Bank of South Africa, in February 2011. The model estimates direct, indirect and induced impacts from agricultural banking activities.