LARGE CORPORATES’ PROFITABILITY DOWN 74.1%

MBABANE - The corporate sector, particularly small and medium-sized enterprises, faces increasing vulnerability due to escalating leverage and declining profitability.

Large corporations are facing financial difficulties. Profitability in large corporates declined by 74.1 per cent due to a decrease in revenue and rising operational costs. According to the Governor of the Central Bank of Eswatini, Dr Phil Mnisi despite a decrease in debt-to-equity ratios, the sector’s financial vulnerability remains high, particularly in light of increased reliance on debt financing. The governor further indicated that Eswatini’s banking sector has remained robust and resilient during the review period. He said total banking assets grew by 9.9 per cent, reaching E28.9 billion.

He said this growth was largely driven by a 12.8 per cent increase in new lending, reflecting strong demand for credit. Total deposits also rose by 10.1 per cent, further strengthening the sector’s base. Dr Mnisi said one of the key indicators of stability within the sector is capital adequacy. He said although there was a decline in capital levels, with Tier 1 Capital dropping from 16.5 per cent to 15.4 per cent, banks still maintain a solid buffer, with an average Capital Adequacy Ratio of 17.4 per cent.

Profitability

He said this is well above the 8 per cent regulatory minimum, indicating that the sector is adequately capitalized to absorb potential shocks. He added that despite these  positive indicators, profitability faced significant pressures. Return on Assets decreased from 2.6 to 2 per cent, and Return on Equity fell from 17.3 to 13.8 per cent. The increase in operational expenses, particularly related to rising interest costs and staff expenses, has impacted banks’ ability to generate profits. Additionally, liquidity slightly weakened, with the liquidity ratio declining from 33.8 to 30.9 per cent. “This underlines the need for careful liquidity management in the period ahead,” said the governor.

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