IMPAIRMENT CHARGE DROPS SBS PROFIT

MBABANE – Swaziland Building Society’s profit after tax slightly dropped to E100.8 million.
The 1.4 per cent decline was reportedly due to a significant increase in impairment charge (ECL).  The profit before tax was recorded at E102.2 million the previous year. This is as per the abridged audited financial statements for the period ending March 31, 2020. They were published in terms of SBS Rules and Section 35 of the Financial Institutions Act, 2005.

According to FinanceTalking, when an asset’s value falls so that it is worth less than the book value, it must be written down to the amount that is recoverable. This means a reduction in the asset value in the balance sheet and an equivalent expense against profit - an impairment charge.

increase

The ECL figures were at E121.3 million. In the past year, it was E71.4 million.  This is a significant increase of E49.9 million from the previous year.
“The significant increase in ECL was as a result of adverse forward looking IFRS 9 macro-economic model adjustments which arose from the deteriorating country’s macro-economic outlook mainly due to COVID-19. “Loans and advances, deteriorated by 1.4 per cent consequential to the significant increase in the ECL driven by the IFRS 9 forward looking model attributable to the global COVID-19 impact,” reported SBS.

Deposits, on the other hand, rose to E1.2 billion. They were at E1.1 billion the previous year. It was an improvement p of 10.6 per cent, as the Society initiated a deposit mobilisation strategy to improve the bank’s liquidity position. Throughout the coronavirus pandemic, SBS reported to have maintained a strong balance sheet growth of four per cent, attributable to property, plant and equipment and financial investments improving from 2019.

interest

“Net interest income grew by 11.1 per cent driven the balance sheet growth on gross loans and advances as the unsecured lending improved by 8 per cent from 2019.
“Non-interest revenue also improved by 15 per cent. This was largely attributable to business addressing the issues of revenue leakages that was improved by the implementation of the new banking system in October 2019.  “The NIR to expenses ratio improved to 61 per cent (2019: 59 per cent) as the transactional volumes improve,” reads the report in part.
Meanwhile, total expenses shot up to E157 million.

 
They were recorded at E142 million the previous year.   
This is an increase of 10.3 per cent mainly due to costs incurred during the testing and implementation of the new banking system.
Despite the tough and uncertain times brought about by COVID-19, the society reported that business had been on resilience producing satisfactory financial performance under the challenging circumstances.

“Globally, regionally and locally, companies’ results commentaries for any period 2020 are going to be dominated by the impact of COVID-19 pandemic as the world faces unprecedented disruptions to businesses.
“Our experiences will forever change the way we operate, presenting novel opportunities and challenges as we adjust to the new normal with altered trends, demand patterns, regulations and operating protocols,” noted SBS.

digitalisation

The bank promised to offer new products and services by means of accelerated digitalisation as well as agile and more automated service offerings, operating and distribution systems.
“We continue to face a wide range of potential economic outcomes partly dependent on the extent of any potential impacts of COVID-19. Therefore, business intends to accelerate the implementation of our digitalisation journey to better service our valued customers.
We are also looking at what additional actions we need to take in light of the new economic environment to make SBS a stronger and more sustainable business,” stressed SBS.

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