NBFI ASSETS RISE BY 4.88% IN 2ND QUARTER

MBABANE – As of June 30, 2023, non-bank financial institutions (NBFI) sector assets increased by 4.88 per cent from E94.24 billion to E98.84 billion.

According to the Financial Service Regulatory Authority (FSRA) Quarterly Bulletin for the second quarter of 2023, this growth was mainly the result of the 16.61 per cent increase in the short-term insurers’ assets and the 34.53 per cent increase in the retail outlets’ assets.

Retirement Funds, Investment Advisors and Collective Investment Schemes realised asset increases ranging from 3.65 to 7.30 per cent, while the other sectors realised asset declines ranging between 0.03 per cent and 1.97 per cent.
Retirement funds remain systemically important accounting for 45.42 per cent of the NBFI assets and 68.76 per cent of the assets managed by the local asset managers.

A change in the performance of assets under management was observed this quarter as all collective investment schemes showed an increase in their assets with African Alliance and Old Mutual, showing double digit growth.

Investment

Growth under the investment advisory space was mainly driven by Stanlib and Imbewu Yesive, while Inhlonhla and African Alliance showed slight losses in their portfolios. FSRA reported that growth in the loans and advances portfolio held by the savings and credit institutions continued to be observed, however, this growth was accompanied by a growing non-performing loans (NPL), which remained a concern and could be an indicator of the need to adjust the loan underwriting practices and or improve the loan recovery strategies.

Under the insurance sector, there seems to be renewed interest in annuities products as significant growth was observed in this class of business, following a series of declines in the past. Another significant growth was observed in the health business underwritten by the short-term insurers. Although the NBFI sector has remained solvent, there are few entities that have continued to accumulate losses, some of which have had solvency challenges and have been put under regulatory intervention to ensure that their solvency is restored.

Meanwhile, as of June 30, 2023, total assets under management stood at E33.81 billion, which was an increase of 4.96 per cent when compared to the last quarter, which had total assets of E32.21 billion, however compared to Q2 2022 a 0.46 per cent decline was observed.

The increase was mainly driven by the 7.28 per cent increase in assets under management by the collective investment scheme managers while the assets under advisory only increased by 4.96 per cent. Global markets including the JSE have been performing well by the close of Q2-2023 and this could have played a role in the increase in the value of total assets, as 67.43 per cent of capital markets are invested in the CMA region and off-shore.

Increase

The value of assets under management (AUM) by CISs is valued at E8.19 billion, showing an increase of 7.28 per cent when compared to the previous quarter. The fund’s geographic asset allocation was as follows; the domestic market accounted for 63.32 per cent indicating an increase of 4.09 per cent, the common market area (CMA) accounted for 26.44 per cent indicating an increase of 14.35per cent, and the offshore market accounted for 10.24 per cent indicating an increase of 10.78 per cent.

It was reported that funds continued to flow in the market as it was evidenced by the increase in investments in different geographic areas. This geographic allocation confirms compliance with the 50 per cent local asset holding required by the Securities Act.

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