LAND BANK ANNUAL REPORT FY2017

Transcription

1 LAND BANK ANNUAL REPORT FY2017 LAUNCH: 3 AUGUST 2017

2 CONTENT 1. Opening Remarks by Programme Director, Mrs. Konehali Gugushe 2. Remarks by Land Bank Board Member, Mrs. Sue Lund 3. Presentation by The CEO, Mr. TP Nchocho 4. Presentation by The CFO, Mr. Bennie van Rooy 5. Q&A 6. Lunch Land Bank Presentation 2

3 3. Report of The Chief Executive Officer Presenter: Mr. TP Nchocho Land Bank Presentation 3

4 Introductory Overview 1. Institutional Consolidation Post the 2015 Restructuring 2. Key Perspectives: The Year in Context 3. The Financial Sustainability Trajectory 4. Governance Integrity & Investor Confidence 5. Development Impact Outcomes 6. Looking Forward 7. Conclusion Land Bank Presentation 4

5 Institutional Consolidation Post the 2015 Restructuring Giving effect to the Corporate Strategy Developmental Effectiveness Financial Sustainability Governance Integrity Ongoing investment in modernisation of the Risk Management Architecture Credit Risk Operations / Enterprise Risk Portfolio Management Attracting and investing in the Best Talent Successful recruitment: Specialised Finance Successful recruitments: Credit & Portfolio Management Deepening Agricultural Economics Land Bank Presentation 5

6 Key Perspectives on the Agricultural Sector Placing the Financial Results in Context Sector still recovering from the 2 years of Drought o The sector was in recession The excellent rainfalls starting last quarter of 2016 and into first quarter 2017 o Sharp recovery as more hectares were planted Pressures have continued on the Poultry industry o Few assets in our portfolio came under distress An industry-wide decline in quantities of animals (livestock units) o Upward pressures on meat prices (Food inflation: 10.8%) Export Performance o SA Agri exports up at R79bn (R64bn year before) Pressures on the financials of the Land Bank Insurance Company (LBIC) o o Drought led to higher claim ratios Premium Income basically flat (re: hectares planted) Land Bank Presentation 6

7 Development Impact Returns The Imperative for an Upward Trajectory in Financial Sustainability High Growth Transformation Employment Land Bank Land Bank Low Financial Returns High Reliant on Government Grants Financially Self Sustaining Highly Profitable Land Bank Presentation 7

8 The Imperative for an Upward Trajectory in Financial Sustainability Investing in the sector prudently Effective Structuring of Credit Risk Robust Portfolio Management Access to Funding Managing Margins & Costs Land Bank Presentation 8

9 Governance Integrity & Investor Confidence We continue to maintain Clean Audits The Mid-Year incident by FutureGrowth and the decision on SOE s Our response was swift and effective Transparency on our Governance, Policies and Structures Prompt action to mace requisite Enhancements Comprehensive revisions to our Domestic Medium Term Note (DMTN) Programme Our National Scale rating maintained at Investment Grade Results: Substantial Capital Raising Capacity Over R7bn for the year under review Land Bank Presentation 9

10 Development Impact Outcomes Highlights R4.8bn in new disbursements (excluding Revolving facilities) New jobs created: Poultry sector jobs maintained: R2.4bn growth in our Loan Book to the Development Sector (Target: R2bn) Black Brokers Development Programme R100m disbursed under Drought Relief Facility Projects to expand irrigated land: hectares Land Bank Presentation 10

11 Development Impact Outcomes Financing Models for Improved Effectiveness Full Service Financial Intermediaries Value Chain Financing Partnerships Joint Ventures / Investment Partnerships Equity Empowerment Finacning (For Growth ) Land Bank Presentation 11

12 Looking Forward The Country can do better to enhance Growth & Inclusivity Institutional synergies to deliver Land Reform projects on a sustainable basis Promoting more Joint Ventures / Investment Partnerships with established Commercial Agriculture Better use of Blended Financing Techniques A National Agricultural Insurance subsidy scheme A Special Programme for Youth Enterprise Development, premised on Skills & Support Land Skills Markets Management Support Capital Land Bank Presentation 12

13 Conclusion Our Sincere Appreciation Ministry of Finance and the Treasury Team Sector Departments: DRDLR, DAFF & DWS The Board of Directors Our Funders Our Channel Partners (Financial Intermediaries) The Employees of the Land Bank Land Bank Presentation 13

14 4. Annual Financial Results Presenter: Mr. Bennie van Rooy Land Bank Presentation 14

15 CONTENT 1. Salient Features 2. Statement of Profit & Loss and Other Comprehensive Income 3. Statement of Financial Position Land Bank Presentation 15

16 Salient Features Group Published basis Like-for-like basis Salient features Var % FY2017 FY2016 Var % FY2017 FY2016 Net interest margin 0.3% 3.1% 3.0% 0.3% 3.1% 3.0% Impairments 9.8% R 81.5m R 74.2m 9.8% R 81.5m R 74.2m Operating expenses (14.4%) R 595.2m R 695.5m 5.9% R 564.1m R 532.8m Cost-to-income ratio (23.1%) 56.8% 73.9% (5.0%) 53.8% 56.6% Profit for the year +100% R 367.0m R 182.0m 0.7% R 398.1m R 395.5m - Banking Operations +100% R 316.3m R 94.0m 13.0% R 347.4m R 307.5m - Insurance Operations (42.4%) R 50.7m R 88.0m (42.4%) R 50.7m R 88.0m Cash (40%) R 1.52bn R 2.5bn (40%) R 1.51bn R 2.5bn Net loans and advances 12.6% R 41.0bn R 36.4bn 12.6% R 41.0bn R 36.4bn Impairment ratio (19.1%) 5.5% 6.8% (19.1%) 5.5% 6.8% Non-performing loans (19.3%) 7.1% 8.8% (19.3%) 7.1% 8.8% NPL coverage ratio % 77.2% % 77.2% Total assets 9.7 % R 45.4bn R 41.4bn 9.7% R 45.4bn R 41.4bn Land Bank Presentation 16

17 Salient Features Bank Published basis Like-for-like basis Salient features Var % FY2017 FY2016 Var % FY2017 FY2016 Net interest margin 0.3% 3.1% 3.0% 0.3% 3.1% 3.0% Impairments 9.8% R 81.5m R 74.2m 9.8% R 81.5m R 74.2m Operating expenses (15.9%) R 570.0m R 678.0m 4.6% R 538.9m R 515.2m Cost-to-income ratio (26.1%) 54.4% 73.7% (8.2%) 51.4% 56.0% Profit for the year +100% R 316.3m R 94.0m 13.0% R 347.4m R 307.5m Total comprehensive income +100% R 305.8m R 71.8m 11.0% R 314.6m R 283.5m Cash (42.9%) R 1.2bn R 2.1bn (42.9%) R 1.2bn R 2.1bn Net loans and advances 12.6% R 41.0bn R 36.4bn 12.6% R 41.0bn R 36.4bn Impairment ratio (24.7%) 5.5% 7.3% (24.7%) 5.5% 7.3% Non-performing loans (19.3%) 7.1% 8.8% (19.3%) 7.1% 8.8% NPL coverage ratio % 77.2% % 77.2% Total assets 10.1% R 43.8bn R 39.8bn 10.1% R 43.8bn R 39.8bn Total CAR Basel Standardised Approach (5.9%) 17.7% 18.8% (5.9%) 17.7% 18.8% Land Bank Presentation 17

18 R million R million Statement of Profit & Loss and OCI Profit for the year Published on a like-for-like basis Published basis Organisational review 31.1 Like-for-like basis The Bank s performance during FY2017 was impacted by additional costs incurred in relation to the Organisational Review as undertaken during FY Although these costs are not significant, a like-for-like comparison is required to fully appreciate the results achieved in FY FY % Published basis Organisational review IFRS 9: FV designation to amortised cost Like-for-like basis Profit for the year Var % FY2017 FY2016 Published basis +100% Organisational review (80.9%) IRFS 9 FV designation to amortised cost (+100%) Like-for-like basis 13.0% FY % Land Bank Presentation 18

19 R million Statement of Profit & Loss and OCI Profit for the year (like-for-like) Performance analysis % Profit for the year FY FY2016 NII Impairments NIR/E Other income Opex Indirect tax & other Discontinued operations FY2017 Profit for the year (like for like) Var % FY2017 FY2016 Net interest income 10.8% 1, , Interest Income 19.5% 4, , Interest Expense (23.6%) (2,977.9) (2,409.2) Net impairment charges (9.8%) (81.5) (74.2) Operating expenses (4.6%) (538.9) (515.2) Profit for the year 13.0% Net interest Margin 0.3% 3.1% 3.0% Cost-to-income ratio (8.2%) 51.4% 56.0% 1 FY2016 amounts have been reclassified to split out PRMA liability interest expense Net interest income Consolidation of the Bank s earnings base resulted in 11% growth of the gross loan book This, together with more appropriate risk-based pricing resulted in a an increase in net interest income of 10.8% In line with expectations, actively lengthening of the Bank s funding profile resulted in increased funding costs Net result is an increased in Net interest margin from 3.0% to 3.1% Impairments IFRS 9 models now in place for a 2 nd consecutive reporting period Impairment charges have stabilised and are more predictable. Operating expenses Excluding R31.1 million as a continuation of once-off costs relating to the organisational review conducted in FY2016, operating expenses marginally increased year-on-year Cost-to-income ratio decreased from 56.0% to 51.4% (published basis: 54.4%) Land Bank Presentation 19

20 Statement of Financial Position Bank Like-for-like basis Salient features Var % FY2017 FY2016 Cash and cash equivalents (42.9%) 1, ,120.6 Net Loans and Advances 12.7% 40, ,353.4 Investments 76.2% Assets of disposal group classified as held-for-sale 31.8% Other assets (26.9%) Total assets 10.1% 43, ,799.5 Capital and reserves 6.0% 5, ,058.8 Liabilities 10.7% 38, , Funding liabilities 11.4% 36, , Provisions (47.7%) Liabilities of disposal group classified as held-for-sale 6.1% Other liabilities (0.8%) Total equity and liabilities 10.1% 43, ,799.5 Land Bank Presentation 20

21 Statement of Financial Position Loan Book: Performance Loan book FY % 7.1% Loan book FY % 8.8% Loan book FY % 9.7% 83.7% 78.1% 81.3% Stage 1: Performing loans Stage 2: Under-performing loans Stage 3: Non-performing loans NPL by Business Line CDB (16,8% of Loans) NPL by Business Line CB (83,2% of Loans) % 15.7% 16.1% 17.0% 3.0% FY2017 FY % 7.5% 2.8% 4.3% 7.4% FY2017 FY % 0 Total Direct Indirect 0.0% 0 Total Direct Indirect Land Bank Presentation 21

22 R billion R billion Statement of Financial Position Loan Book: Impairment Coverage Loan Book Impairments and Coverage -11.1% 77.2% 74.8% FY2015 FY % FY % 80% 60% 40% 20% 0% Land Bank s IFRS 9 models have now been in place for a 2 nd consecutive reporting period and Impairment levels have stabilised and are more predictable : Impairment ratio of 5.5% (FY2016: 6.8%); and NPL coverage ratio of 77.1% (FY2016: 77.2%) Specific impairments Portfolio impairments Coverage Loan Book and Impairment ratio 7.3% % 8% % 4.0 7% 6% 5% 4% % 2% 1% Although total impairment coverage has remained unchanged yearon-year, the Impairment Ratio for FY2017 has reduced to 5.5% as a result of reduced Specific Impairments, in line with decrease in the NPL portfolio. The reduction in the NPL portfolio is largely driven by two successful workout solutions for two previously legacy distress clients, as well as more favourable weather conditions during the year which has cushioned the impact of the drought on the Bank s NPL portfolio. 0 FY2015 FY2016 FY2017 0% Stage 3: Non-performing Stage 1: Performing Stage 2: Under-performing Impairment ratio Land Bank Presentation 22

23 Statement of Financial Position Capital and Liquidity Management: CAR, LCR, NSFR Total Capital Adequacy Ratio 20% 15% 10% 5% 0% 18.8% 6.3% 1.2% 11.3% FY % 17.7% 5.7% 1.1% 10.9% FY2017 Guarantee Tier 2 Capital Total CET 1 Capital Target CAR Following the Land Bank s voluntary introduction of a number of the Basel Accord s capital and liquidity risk management practices during FY2016 the Bank s balance sheet has been significantly strengthened. The Basel-like principles includes: Total Capital Adequacy Ratio (TCAR) Basel II standardised approach Liquidity Coverage Ratio (LCR) Basel III; and Net Stable Funding Ratio (NSFR) Basel III Approved deviations: 20% 18.8% 0.0% -5.9% 0.8% -1.9% 17.7% CAR Inclusion of Government guarantees as Capital Supply 15% 10% 5% LCR High quality liquid assets Roll-over rates 0% FY2016 Guarantee Profit RWA FY2017 The year-on-year decline in CAR is as a result of increased RWA s Land Bank Presentation 23

24 R million Statement of Financial Position Capital and Liquidity Management: CAR, LCR, NSFR 2,200 2,000 1,800 1,600 1,400 1,200 1, Cash 1,228 FY2015 1,369 FY2015 2,121 FY % The Bank s cash requirements are driven by LCR. 1,211 FY % Land Bank has access to a number of liquidity facilities which it taps into from time to time, of which: 2,063 FY2018/Q1 240% 80% 60% 40% 20% 0% Liquidity Cover Ratio 55.0% FY % 85.0% FY % 60.0% Net Stable Funding 229.4% 70.0% FY2018/Q1 LCR Target 100% NSFR +9.7% +8.4% NSFR Target 100% 94.0% 100% 86.7% 90.0% 79.0% 80.0% 80% 80% LCR 80% 60% 40% 20% 0% R2.15 billion Committed R0.50 billion Uncommitted 60% 40% 60% 40% At the time of this presentation all committed facilities are undrawn 20% 0% FY2016 FY2017 FY2018/Q1 20% 0% Land Bank Presentation 24

25 Statement of Financial Position Funding: Investor Base Nominal Related Parties DFI SOE Commercial Bank Foreign Banks Institutional Investors Multi-lateral Investors Agri Companies Total Drawn Facilities , ,900 < 1 Year 10, ,778 2, , , Years , , , Years , , Years , Years > 10 Years ,032 Total 10, ,778 6,942 1,193 14, ,045 % Distribution 28.3% 1.6% 4.7% 18.2% 3.1% 39.2% 2.5% 2.4% The Land Bank s investor relations strategy is bearing fruit. Renewed investor confidence is evident with the Bank seeing increased support from existing funders as well as new investors/ funders. Furthermore, the Bank has also managed to lure back investors that had previously left the Bank. The Bank has a well diversified investor base across local debt and capital markets, as well as foreign funding relationships with Banks and multilaterals. 100% 80% 60% 40% 20% 0% 80.9% 11.2% FY % 56.5% 5.8% 37.7% FY % 2.3% 55.0% FY2011 Diversification of investor base 45.6% 41.1% 29.7% 7.8% 2.1% 2.3% 52.3% 56.6% 62.4% FY2012 FY2013 FY % 18.6% 50.3% FY % 20.8% 47.4% FY % 21.4% 50.3% FY2017 PIC & CPD Banks Institutional investors Land Bank Presentation 25

26 Statement of Financial Position Funding: Strategy and Execution 30.0% Funding Profile Medium Term target 10.0% 5.0% 5.0% 50.0% < 1 year 3 years 5 years 7 years 10 years Notes on summary of the Bank s funding activities for FY2017 Debt excl. Call Bonds and Facilities Total maturities Debt rolled over New funding raised FY2017 R34.8bn R28.6bn R7.7bn FY2017 was a good funding year with the Land Bank achieving average roll-over rates as follows: Land Bank has made great strides in extending its maturity profile, thereby reducing refinancing risk and improving general liquidity levels of the Bank. The extension of the maturity profile has been done in a well coordinated, responsible and cost-effective manner, protecting the Bank s net interest margins. It is expected that the Bank will achieve it s Medium-Term target funding profile by 31 March Excl. PIC/ CPD: 73% PIC/ CPD: 100% Total: 85% Significant funding transactions concluded post year-end Post year-end the Land Bank concluded the following significant funding transactions. A R1.3bn agricultural development facility with the World Bank; A US$300m facility from international banks in collaboration with the Multilateral Investment Guarantee Agency (MIGA). Land Bank Presentation 26

27 Statement of Financial Position Funding: Profile Remaining vs. Original time to Maturity FY2017 Amortised Cost - RttM Total Excl. PIC/ CPD 31 Mar 2017 R m % R m % Drawn Facilities 2, % 2, % < 1 Year 21, % 10, % 1 3 Years 8, % 8, % 3 5 Years 3, % 3, % 5 7 Years 1, % 1, % 7 10 Years > 10 Years 1, % 1, % Total 37, % 27, % FY2017 Remaining time to Maturity ( RttM ) 7.7% 8.7% 2.7% 2.8% 21.8% 56.4% Drawn Facilities < 1 Year 1-3 Years 3-5 Years 5-7 Years 7-10 Years > 10 Years FY2017 Original time to Maturity ( OttM ) 2.8% 7.7% 6.9% 0.8% Drawn Facilities < 1 Year 13.7% 1-3 Years 3-5 Years 48.9% 5-7 Years 19.1% 7-10 Years > 10 Years Amortised Cost - OttM Total Excl. PIC/ CPD 31 Mar 2017 R m % R m % Drawn Facilities 2, % 2, % < 1 Year 18, % 8, % 1 3 Years 7, % 7, % 3 5 Years 5, % 5, % 5 7 Years 2, % 2, % 7 10 Years % % > 10 Years 1, % 1, % Total 37, % 27, % Land Bank Presentation 27

28 Statement of Financial Position Funding: Profile Profile Remaining vs. Original time to Maturity FY2018/Q1 Amortised Cost - RttM Total Excl. PIC/ CPD FY2018/Q1 R m % R m % Drawn Facilities % % < 1 Year 20, % 9, % 1 3 Years 7, % 7, % 3 5 Years 5, % 5, % 5 7 Years % % 7 10 Years 2, % 2, % > 10 Years % % Total 38, % 28, % FY2018/Q1 Remaining time to Maturity ( RttM ) 1.3% 2.5% 6.4% Drawn Facilities 2.5% < 1 Year 15.2% 1-3 Years 52.3% 3-5 Years 5-7 Years 19.8% 7-10 Years > 10 Years FY2018/Q1 Original time to Maturity ( OttM ) 1.3% 6.1% 3.1% 9.2% 16.2% 20.5% 43.7% Drawn Facilities < 1 Year 1-3 Years 3-5 Years 5-7 Years 7-10 Years > 10 Years Amortised Cost - OttM Total Excl. PIC/ CPD FY2018/Q1 R m % R m % Drawn Facilities % % < 1 Year 17, % 6, % 1 3 Years 7, % 7, % 3 5 Years 6, % 6, % 5 7 Years 3, % 3, % 7 10 Years 2, % 2, % > 10 Years 1, % 1, % Total 38, % 28, % Land Bank Presentation 28

29 R billion Statement of Financial Position Funding: Application of funding to lending activities Development Commercial FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 The Bank broadly defines Development as loans to HPDI s, commercial/ corporate operations where Black Ownership is > 50%, and/ or BBBEE Level 4 or better contributors. At present the Development Book approximates 11% of the Bank s total loan book, R4.9bn of R43.3bn. Included in the Development Book is approx. R949m which extended through the Bank s CDB WFF product, i.e. intermediary support model which has very low levels of NPL s. Land Bank Presentation 29

30 R billion Statement of Financial Position Funding: Application of funding to lending activities (Continued) CDB CB The Bank services the agricultural sector through two service delivery channels, wiz: Direct Indirect, i.e. Intermediary, or SLA partners FY2015 FY2016 FY2017 Direct Indirect 0 There has been no material change in the make up of the Bank s Loan Book year-on-year with approx. 83.2% of the Bank s loan assets allocated to Corporate Banking. 52.4% 47.6% Land Bank Presentation 30

31 THANK YOU!