ECONOMIC HURDLES DROP SWAZILAND BANKS PROFITS

MBABANE – Bank profitability somewhat weakened in 2017 due to the on-going challenging economic environment.

The average Return-on-Assets (ROA) and Return-on-Equity (ROE) ratios declined from 3.2 per cent and 22.4 per cent respectively at the end of June 2016, to 2.2 per cent and 15.7 per cent by June 2017 respectively.

By international standards, however, the ROA and ROE ratios remained at relatively high levels.
Year-on-year net after tax earnings were E399.0 million, a decrease from E510.3 million in June 2016.
The Central Bank of Swaziland (CBS) Financial Stability Report 2017 uncovered that the weakened profitability was as a result of the increase in Non-Performing Loans (NPLs) and the increased inflation, which hiked operating costs.

The Swaziland banking sector comprises of four commercial banks (one of which is a government-owned bank) namely: FNB, Standard Bank, SwaziBank and Swaziland Building Society.
However, it must be mentioned that banks remained well capitalised during the period under review, with developments in 2017 resulting in increases in paid-up capital and reserves.

All banks met the minimum capital adequacy requirements of 4.0 per cent for tier 1 capital, 8.0 per cent for total capital, and E15.0 million for minimum paid-up capital.

The aggregate industry-wide regulatory tier 1 capital adequacy ratio and total capital adequacy ratios were at 21.0 per cent and 23.5 per cent respectively, therefore showing the banks’ strong solvency positions.

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