BUILDING SOCIETIES HIT BY INCREASED NON-PERFORMING LOANS

MBABANE – Non-performing loans in the building society sector, for the first time since March 2022, showed a slight increase of 0.86 per cent when compared to the previous quarter.

There are currently two building societies in the country, namely; Swaziland Building Society (SBS) and Status Capital Building Society. According to the FSRA quarterly bulletin, the value of loans and advances increased by 3.28 per cent quarter-on-quarter and 16.55 per cent year-on-year to E2.45 billion.

growth

The quarterly growth was the result of the increase in mortgages on personal and commercial holdings. As of June 30, 2023, the building societies had total assets of E3.32 billion, which was stagnant compared to the previous quarter. However, a year-on-year comparison shows an 8.56 per cent increase from E3.06 billion. The yearly increase was mainly driven by the growth in loans and advances, which could be caused by an increase in the number of new homes being built and other retail credits that the building societies offer to customers. On the liability side, a marginal decrease of 1.49 per cent on a quarterly basis was observed, however on a yearly basis, an increase of 33.64 per cent to E1.69 billion was observed.

decline

The quarterly decline was mainly due to the decrease in the Vostro account, indicating a decrease in interbank transactions, which led to fewer payments being made into the Vostro account. A Vostro account is defined as an account that a correspondent bank holds on behalf of another bank. However, the yearly increase in total liabilities was mostly attributed to growth in deposits in transmission or demand accounts. Building societies’ total income decreased by 42.38 per cent quarter-on-quarter and by 83.49 per cent year-on-year to E3.32 million. The quarterly decrease in income was driven by the decline in income adjustments, taxes and foreign investments.

However, yearly, the decrease was mainly from non-interest income, i.e. commissions and dividend income. During the same period, total interest income earned from mortgages, loans/advances and investments increased by 15.55 per cent to E145.98 million. This is attributed to the increase in interest rates, which continue to be experienced across the globe, enabling deposit-taking institutions to also increase the interest charged on customers.

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