CENTRAL BANK OF SEYCHELLES

Transcription

1 CENTRAL BANK OF SEYCHELLES MONTHLY REVIEW April 20122

2 1.0 Key Economic Developments The month of April witnessed further inflationary pressures as prices continued to rise especially following the review of fuel prices at the pump and the depreciating trend in the Seychelles rupees (SCR). Nonetheless, economic activity is expected to have at least remained the same in view of the relatively good performance in the tourism sector. 1.1 Inflation The consumer price index (CPI) for the month of April showed a month-on-month rise of 1.3% compared to 0.2% the month before. The driving factor behind the faster rise in prices was a revision made in fuel prices which resulted in a 4.6 per cent increase in the transportation category. Moreover, the month under review recorded a rise in beverage prices as the country s main brewery; Seychelles Breweries revised its prices upwards by 6.1 per cent and 4.9 per cent on non-alcoholic and alcoholic beverages, respectively. Given the above-mentioned price revisions, year-on-year inflation rose from 5.8% the previous month to 7.0%. As a result, the 12-month average rate picked up pace to reach 4.6 % compared to 3.9% the month before. Per cent (%) Chart 01: Inflation 12-month average Year-on-year 1.2 Exchange Rates SCR Chart 02: Exchange Rates SCR/US$ SCR/EUR During the month of April 2012, the SCR on average traded at and against the USD and the EUR respectively. This translated into a monthly depreciation of 0.2 per cent against the USD and an appreciation of 0.3 per cent vis-à-vis the EUR. In comparison with the same month the year before, the rupee continued to follow a 1

3 depreciating trend against both the USD and the EUR. The SCR depreciated by 193 cents and 119 cents against the USD and EUR respectively. Excess demand relative to supply of foreign exchange has been identified as one of the primary factors for the depreciation. 1.3 Foreign Exchange Transactions Total foreign exchange purchased by authorised dealers for the month stood at US$36 million compared to US$44 million the month before. This translated into an 18 per cent decrease in inflows relative to the previous month. On the other hand, aggregated foreign exchange sales totalled US$43 million, resulting in a net outflow of US$7.1 million in comparison to a net outflow of US$3.5 million recorded in March Commercial banks continue to maintain the largest share of foreign exchange transactions, accounting for 71 per cent of the market share. 1.4 Commercial Banks Interest Rates The month under review recorded a decline Chart 03: Interest Rate in return on fixed term rupee deposits at commercial banks from 2.94% in March 2012, to 2.45%. The reduction in return was as a result of a drop in interest rates across all maturity profiles, with the above Per cent Per cent 3 months and up to 6 months deposits recording the fastest decline of 1.43 percentage points Average Lending Rate Savings Rate (secondary axis) 1.0 The effective lending rate at commercial banks for April 2012 stood at 11.52% compared to 11.48% in March In April 2011, the lending rate was 11.04%. For the first time in five months, a change was recorded in the effective savings rate from 1.14% the preceding months to 1.17%. 2

4 Central Bank of Seychelles Monthly Review: April Reserve Money, Money Supply and credit Reserve Money 1 The stock of reserve money at the end of April 2012 stood at R1,867 million or R67 million above the target of R1,800 million. This outcome was mainly Chart 04: Reserve Money due to the Bank s rejection of bids perceived as bearing too high interest rates. The total amount of liquidity withdrawn from the banking system was R1,203 million mainly through the deposit auction arrangement Money Supply There was a rise in money supply in April 2012 relative to the preceding month. The increase in money supply was primarily as a result of a growth in transferablee and foreign currency deposits by 3..8 per cent and 3.1 per cent respectively. SCR (millions) Chart 05: Money Supply 9,000 8,000 7,000 6,000 5,000 4,000 3, , Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Money Supply, M3 Money Supply, M2 Money Supply, M1 m-m Change - M3 m-m Change - M2 m-m Change - M Change (per cent) An increase in net foreign assets (NFA) was also recorded, mostly driven by a 5.8 per cent rise in the commercial banks NFA, whilst that of the Central Bank increased by 1..9 per cent. Similarly, domestic assets also increased, with net claims on government rising by 3.5 per cent. On the other hand, both claims on public entities and the private sector dropped by 1.1 per cent. As for the broadest monetary aggregate, M3, this expanded by 1.9 per cent on a month-on-month basis to R7,964 million, driven by a 3.1 per cent rise in foreign currency deposits from R2,,710 million to R2,794 million in April R Reserve money consists of currency in circulation and depository corporations reserves at the Central Bank. Under the adopted monetary targeting framework, the Central Bank has to ensure the level of reserve money does not exceed a predetermined ceiling 3

5 April 2012 also saw M2 expand by 1.3 per cent to stand at R5,171 million even though quasi-money recorded a decline. The growth in M2 was primarily due to an expansion in M1 particularly transferable deposits. Both private and parastatal sectors recorded an increase in their transferable deposits of 2.6 per cent and 17 per cent respectively Credit The stock of outstanding credit at commercial banks as at end of April 2012 stood at R5,641 million, translating into month-on-month growth of 1.8 per cent. The main factor was an increase in claims on government. SCR (million) 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 Chart 06: Commercial Banks Credit Government Public Non-Financial Sector Private sector Credit to the private sector contracted by 1.0 per cent relative to March 2012, and on a year-on-year basis a growth of 2.6 per cent was recorded. On the other hand, claims on government rose from R2,063 million in March to R2,200 million in the month under review. Claims on the Public entities declined by 1.0 per cent, to stand at R424 million. 1.6 International Reserves As at the end of April 2012 gross international reserves stood at US$294 million, an increase of US$2.0 million over that of the preceding month. The rise in gross reserves translated into an increase in import cover from 2.7 months of imports the month before to 2.8 months of cover in April Net international reserves (NIR), stood at US$224 million, being above the Q2 target of US$220 million by US$4.0 million. US$ (million) Chart 07: International Reserves Gross Foreign Reserves Import Cover (Secondary Axis) Months 4

6 1.7 Fiscal Outcome A primary surplus of R42 million equivalent to 0.3 per cent of GDP, was recorded for the month of April 2012 against a budgeted deficit of R38 million (0.2 per cent of GDP). The relative positive performance was primarily due to improved revenue collection which offset the rise in government spending for the month. SCR (millions) Chart 08: Fiscal Outcome, April 2012 Total Revenue Total Expenditure Primary Balance Overall Balance Total expenditure and net lending stood at R486 million, 1.6 per cent above the level projected in the budget. Higher capital expenditure (R96 million) and net lending (R1.7 million) which stood at 15 per cent and 260 per cent above their budgeted amounts respectively, were the main causes for the increase in total spending. Budget Actual With regards to revenue collection, a total of R449 million or 6 per cent above projection was recorded during the month under review. Tax revenues were 17 per cent above forecast. In value terms, Goods and Services Tax (GST) was the main component of tax revenue and was 12 per cent above its forecast. The business tax category outperformed its budget by the most -64 per cent - to stand at R80 million. As regards to non-tax revenue, this was 53 per cent below expectations in view of lower dividend income which was 91 per cent below expectation. Following these developments, an overall surplus of R18 million was recorded for the month of April 2012, compared to the projected overall deficit of R51 million. 5

7 1.8 Public Debt As at end of April 2012 the total stock of public debt stood at R10,644 million (US$757 million) equivalent to 78 per cent of GDP of which external debt was 47 per cent of GDP. In comparison to the previous month, in US dollar terms, total debt increased by 3.3 per cent and decreased by 2.1 per cent relative to the same month in The year on year decline in total public debt was on account of an 18 per cent decrease in domestic debt whilst external debt declined by 3.9 per cent. SCR (million) 10,000 8,000 6,000 Chart 09: Public Debt , , Domestic debt External debt Total debt Domestic debt/gdp External debt/gdp Total debt/gdp % of GDP 1.9 Tourism During April 2012, the total number of visitors to the Seychelles was 20,049, which was a 4.5 per cent increase over the same month last year. Despite the worsening of the European debt crisis, the majority of these visitors originated from Europe, accounting for 72 per cent of total arrivals, with France remaining the main market, supplying 19 per cent of total visitor arrivals. Like in April 2011, during the month under review visitors stayed for an average of 9.6 nights, compared to 9.5 nights in the previous month. 6

8 2.0 Key Financial Sector Developments General Financial Soundness Indicators Chart 10: General Financial Soundness Indicators For the month under review, significant growth was observed in the banking 17,500 sector s total assets and total deposit 15,000 12,500 liabilites, in comparison to the previous 10,000 month. Equity capital 3 also observed an SCR (millions) 7,500 5,000 increase while a minor decline was noted in the industry s loans and advances. 2,500 0 Total deposits liabilities Total assets Total assets rose by R310 million, representing an increase of 2.1 per cent. Loans & advances Equity Capital This rise was mainly attributed to an overall increase of R224 million in the industry s external assets 4, more specifically, securities and other investments which grew by R415 million. A higher growth rate was seen in total deposit liabilities this month, as the item grew by R343 million (compared to R35 million in the previous month). This is a direct result of the R391 million increase observed in the industry s deposits denoted in foreign currency. With respect to the rise observed in equity capital, this was attributed to an increase in current unaudited profits. The industry recorded a net profit of R32 million during the period under review. Loans and advances 5 showed a decline of R36 million in the review period as a result of a drop in the industry s term loans. It should be noted that since January 2012, there has been a general decline in the industry s loans and advances. On a year-on-year basis, the industry observed growth in its total assets (14 per cent), total loans and advances (0.3 per cent), total deposits liabilities (11 per cent) and equity capital (9.3 per cent). 2 Refer to Table 01 in sub-section 2.5 for a summary of the financial indicators. 3 This includes paid-up capital, statutory reserve fund, other reserves, undistributed profit or loss and current unaudited profit or loss. 4 Consists of foreign currency notes, balances due from financial institutions abroad and securities and other investments. 5 Excluding government securities 7

9 Central Bank of Seychelles Monthly Review: April Capital Adequacy Indicators The Financial Institutions Act, 2004 stipulates a minimum Risk Weighted Capital Adequacy Ratio (RWCR) 6 of 12 per cent. As illustrated in Chart 11, the industry s RWCRR stood at 25%, a slight increase of 0.6 percentage points from February The ratio Chart 11: Capital Adequacy Indicators remains well above the minimum required 30.0 level Percentage (%) Regulatory capital to risk weighted assets Net tangible capitalisation ratio With regards to the net tangible capitalisation ratio, a marginal increase was observed from the previous month. As at April 2012, the ratio stood at 9.4%, which was well above the recommended level of 6.0 per cent. This shows that the industry is well capitalised and thus well cushioned in case of unexpected future losses. 2.3 Asset Quality Indicators An increase was observed in both the industry s non-performing loans 7 (NPLs) and specific provisions during the Chart 12: Asset Quality Indicators SCR (millions) AprMayJun Jul AugSep Oct NovDec Jan FebMarApr Non performing loans (NPLs) Specific Provisions Non-performing loans to gross loans (secondary axis) Provision as % of non-performing loans (secondary axis) No significant changes were observed in the industry s NPLs to gross loans ratio and provision as a percentage of NPLs ratio as they stood at 8.6 per cent and 34 per cent respectively for the month under review Percentage (%) month under review. NPLs went up by R10 million, driven by a general increase in all categories of NPLs. The highest increase was seen in loans classified in the substandard category which rose by R3.7 million. With regards to specific provision 8, a rise of R3.5 million was recorded, mainly due to increased provisions on loans in the loss category. 6 Capital base (mainly paid-up capital, statutory reservee fund, undistributed profit or loss, year to date net profit and general provision) divided by risk weighted assetss (on balance sheet and off balance sheet assets that have been weighted according to their risks). 7 These include loans classified as substandard, doubtful and loss category as per the Credit Classification and Provisioning Regulations 2010, as amended in Specific provisions are on special mentions loans and NPLs. 8

10 2.4 Earnings and Other Indicators In April 2012, Return on Assets (ROA) and Return on Equity (ROE) increased to 3.7% and 40%, respectively. Trend in both ratios were driven by a drop of 22 per cent or R10 million in absolute terms, in the industry s total expenses. Chart 13: Earnings and Other Indicators 70 Broad liquid assets 9 to total liabilities ratio dropped from 65% to 63%, driven by the rise in total deposit liabilities. This showed that 20 the industry s broad liquid assets could 10 0 match 63% of its total liabilities 10 as at April Return on assets Return on equity For the month under review, the industry s Broad liquid assets to total liabilities Net open position to capital total long and total short position to capital ratio remained within the 30% limits as prescribed by the Foreign Currency Exposure Regulations, The total long and total short position was recorded at 5.5% and -3.6% respectively, giving a net open position to capital ratio of 1.9%. This is a slight decrease from the previous month when the net position stood at 2.9%. Percentage (%) 9 Consist of cash, balances with CBS, balances with other banks and Government securities. 10 This is in line with the Liquidity Risk Management Regulations, 2009 which stipulates that a bank shall maintain liquid assets in an amount which shall not, as a daily average each month, be less than 20 per cent of the bank's total liabilities. 9

11 2.5 Summary of Financial Indicators Table 01: Summary of Financial Indicators (Ratios) Figures are in SCR 000 Total deposits liabilities Total assets Loans & advances Equity Capital Non-performing loans (NPLs), gross Actual Provisions (Specific) Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 11,468,392 11,472,676 11,592,545 11,454,343 11,114,427 11,081,404 11,131,741 11,494,403 11,814,363 11,975,066 12,328,831 12,363,619 12,706,970 13,281,849 13,310,091 13,419,654 13,399,424 13,445,647 13,360,231 13,351,879 13,708,186 14,245,237 14,268,867 14,757,765 14,780,042 15,089,670 4,057,917 3,962,072 3,989,484 3,995,953 3,975,748 4,031,231 4,022,141 4,045,297 4,008,378 4,126,549 4,121,746 4,107,398 4,071,552 1,278,008 1,276,050 1,292,379 1,295,839 1,330,539 1,350,510 1,214,957 1,259,652 1,285,468 1,328,328 1,368,572 1,351,290 1,397, , , , , , , , , , , , , ,258 68,376 67,689 82,793 82,537 84,416 86,791 85,009 83, , , , , ,456 Figures are in percentage (%) Capital Adequacy Regulatory capital to risk weighted assets Net tangible capitalization ratio Asset Quality Non-performing loans to gross loans Provision as % of nonperforming loans Earnings & Profitability Return on assets Return on equity Liquidity Broad liquid assets to total liabilities Sensitivity to Market Risk Total long position in foreign exchange to capital Total short position in foreign exchange to capital Net open position to capital Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr

12 3.0 Key Developments in the Money Market 3.1 Open Market Operations In April 2012, the Bank issued a total of R1, 667 million in DAA alone, inclusive of interest, whilst R1,681 million matured. In addition, there was maturity of R127 million worth of RRA. 3.2 Money Market Interest Rates Interest rates on the DAA remained relatively stable above the 5.00% mark in early April, with minor volatilities observed in the shorter term maturities. The rates peaked at their highest in the week ending April 27, 2012, where the 28-day maturity reached 6.00%, which was higher than the rates for the 63-day and 91-day maturities. For much of the month, the commercial banks bid mostly in shorter term maturities except in the week ending April 20, Table 02: Weekly Summary of DAA Interest Rates 11 Week Ending DAA Seven (7) Days DAA Fourteen (14) Days DAA Twenty One (21) Days DAA Twenty Eight (28) Days DAA Sixty Three (63) days DAA Ninety One (91) Days 6-Apr Apr Apr Apr The average yield on treasury bills declined across all maturities except for the 365-day bills. The average interest rate on the 91-day and 182-day bills stood at 5.36% and 5.61% respectively, which were below the corresponding maturities for the preceding month. It is noteworthy however, that yields on 365-day bills increased by 27 basis points relative to the same maturity the month before. 11 Latest applicable rates 11

13 4.0 Key Developments in Banking Services 4.1 Securities Exchange During the month, CBS and the Seychelles International Business Authority (SIBA) met to discuss the National Clearance and Settlement Systems Act (NCSS). The discussions focused mainly on the NCSS Act and the implications it has on the two bodies as regulators of the Clearing Agency and the Clearing system which may be licensed in Seychelles. SIBA has recently given Trop-X 12 the approval and go ahead to satisfy the requirements for licensure as a Securities Exchange with part of the requirements being the setting up of a Clearing Agency for the Securities Exchange. SIBA made a presentation to CBS officials on the latest model and structure on how the Securities Exchange will operate. 4.2 Cheques Standardisation Project In line with the upcoming Electronic Cheque Clearing system, the project to introduce standardised and Magnetic Ink Character Recognition (MICR) Code Line compliant cheques is still in progress. The Service Level Agreement (SLA) for cheques printing, personalisation services and production of cheque books was signed on the 27 th of April, It is to be reiterated that this project is vital to the establishment of a critical mass of compliant cheques that will allow for the smooth implementation of the Truncated Image Automated Clearing House (TIACH). Upon completion of this project, all cheques currently circulating in Seychelles will be replaced by standardised and MICR Code Line compliant cheques. 4.3 Issue of commemorative coins On April , the Bank issued two new commemorative silver coins in commemoration of the Diamond Jubilee of HM Queen Elizabeth II and the Olympic Games 2012 Javelin theme. Both coins have a face value of twenty five rupees. 12 Trop-X is part of the QuoteAfrica group of companies which includes Trop-X Limited (licensed Seychelles Securities Exchange), AfriClear Limited (Seychelles Clearing Agency expecting license in August 2012) and AfriDep (Seychelles Securities Facility expecting license in August 2012). 12