The Development Bank of Southern Africa (DBSA) has reported a 9.3% year-on-year increase in its net interest income to R4.4-billion and a 55.9% increase in operating income to R5.6-billion for the six months to September 30.

Net profit increased by 91.2% to R4.1-billion and the annualised return on equity (ROE) on net profit increased to 13.8%, while the cost-to-income ratio improved to 20.1%.

The bank explains that the increase in the net profit for the period under review stems from the increase in net interest income, a higher net gain from financial assets and liabilities.

Total assets increased by 1% to R122-billion and total development loans and development bonds increased by 2.3% to R117.3-billion.

Total disbursements (loans and equities) amounted to R11.1-billion.

Cash flow generated from operations increased by 5.2% to R3.3-billion and total loan book repayments increased by 4.4% to R12.9-billion.

The DBSA’s gross nonperforming loan (NPL) ratio decreased to 3%, while the net NPL ratio decreased to 1.1% and impairment losses decreased to R497-million.

Its debt-to-equity ratio, excluding R20-billion callable capital, improved to 92%, while the debt-to-equity ratio including R20-billion callable capital improved to 70%.

The DBSA says callable capital is authorised shares but not yet issued.

It notes that the current operating environment continues to remain challenging, buoyed by improved investor sentiment, the exchange value of the rand performing well and government bond yields having declined, coupled with declining interest rates and relatively lower inflation.

The bank explains that it has assets and liabilities that are mostly denominated in dollar and euro.

Additionally, the DBSA funds projects in dollar and euro outside of South Africa.

Consequently, the bank says it has a net foreign currency asset position – total foreign currency asset minus total foreign currency liabilities – amounting to $93-million.

Given the rand appreciation against the dollar during the interim period when compared to the prior year, the DBSA notes that foreign currency exchange rate gain in the income statement amounted to R52-million – R217-million loss in the prior interim period.

While the net foreign currency position is not fully hedged, the bank says it closely monitors and manages its exposure to foreign exchange rate risk using natural hedges and derivative hedging strategies.

The bank says it remains efficient in managing operational costs and the cost optimisation strategy continues to be effective.

The total cost-to-income ratio for the current interim period improved to 20.1% and the ratio continues to be in line with the bank’s cost optimisation strategy and well below the limit of 35%.

FUNDING & LIQUIDITY

Meanwhile, the DBSA says its liquidity and capital position remains strong.

The bank notes that it continues to raise funding from a diverse pool of funding sources which include debt capital markets, bilateral engagements with commercial banks, bond market, money market, private placements and international development finance institutions.

As at September 30, the 30-day liquidity coverage ratio amounted to 463%.

The bank’s total debt redemptions for the six months amounted to about R6.9-billion.

Liquidity holdings remained within policy parameters with total liquid assets of R11.3-billion as at September 30, down from R15-billion as at March 31.

The bank’s total outstanding debt funding decreased by R3.3-billion, from R60.8-billion as at March 31 to R57.5-billion as at September 30.

The DBSA says its loan book remained resilient in a difficult environment.

The cash collections from the loan book for the interim period amounted to R12.9-billion with development loan and equity disbursements amounting to R11.1-billion when compared with R7.1-billion in the prior interim period.

The bank’s total asset base increased by 1% from R121-billion (March 31) to R122-billion as at September 30, mainly owing to increase in investment securities of R1.8-billion.

Additionally, development loans and equity disbursements increased from R7.1-billion in the prior interim period to R11.1-billion in the current interim period.

As at September 30, the equity investment portfolio increased by 9.7%, from R4.6-billion as at March 31 to R5-billion owing to positive fair value movements, disbursements, capital redemption and currency movements.

Cash and cash equivalents decreased by 25% from R15-billion to R11.3-billion in line with loan disbursement requirements and the Bank liquidity risk management policy.

OUTLOOK

Despite the challenging economic environment, the DBSA says it has a strong leadership and management team steering the bank through these challenges, while following the principles of good corporate governance.

The DBSA says its growth strategy remains focused on catalysing development, fostering partnerships and mobilising resources to address developmental challenges and unlocking the full potential of the African continent.

“The bank has a resilient balance sheet and continues to play a significant role in infrastructure development through lending and non-lending activities.

“Both domestic and global economic factors are critical to the achievement of the bank’s objectives.

“The bank has a healthy pipeline of projects that form a solid platform for success in the future and will continue to focus on disbursing to infrastructure projects to grow developmental impact in line with its mandate,” it says.