DBSA takes big profit hit as it braces for additional credit losses
As a result of the pandemic the development bank has increased its provision for expected credit losses by 65% to R10.2bn
The Development Bank of Southern Africa (DBSA) says profits fell more than three quarters in its year to end-March, as a deteriorating economic outlook weighs on the ability of its clients to repay loans.
Net profit fell 84% to about R504m in the DBSA’s year to end-March, when development loan disbursements rose 75% to R15.7bn.
The total expected credit loss charge increased to R3.6bn to end-March from R1.4bn previously, while the DBSA’s provision for expected credit losses increased by 65% to R10.2bn.
“Despite the challenging economic environment, the DBSA has a strong leadership and management team steering it through the challenging Covid-19 pandemic-driven recessionary environment, while following principles of good corporate governance,” the bank said.
Ratings agency Moody’s Investors Service had downgrade the DBSA to junk earlier in 2020, in line with the sovereign rating downgrade, but the bank said its capital position remains strong.
Total debt increased to R61bn at the end of March from R51bn previously, while its debt-to-equity rose to 108% from 90% previously.
This is still well below the regulated debt-to-equity ratio cap of 250%.
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