Land Bank half-year profit up 71.8%

The Land Bank has beaten difficult economic conditions in SA, worsened by bad weather, to report a R57.3m profit for the half-year to September 2017.

The Land Bank has beaten difficult economic conditions in SA, worsened by adverse weather conditions, to report a R57.3m profit for the half-year to September 2017.

The bank, a specialised agricultural financial institution, is wholly owned by the state, although it receives no subsidies from the government. It raises funds on capital markets.

In September, the bank raised R1bn in a bond auction, 25% more than the targeted sum. The bank’s profit for the six months was 71.8% higher than the profit for the matching period a year ago.

It attributed what it called a strong set of financial results to improved interest income of R632.2m, up from R18.6m (3%) from the comparable period in 2016. It also recorded lower impairment charges, down R35.5m (19.4%), and broadly higher income, notably from investments, which was up R23.5m (or 46.5%).

The bank competes with commercial banks by borrowing money, which it then lends to its clients at market-related interest rates. It does not, however, pay tax or a dividend to its shareholder, the state. Instead, this money is used to support agricultural development.

Bennie van Zijl, GM of commercial farmers organisation TAU SA, said on Monday the bank’s continued strong financial performance was surprising. “With such a small market, and with the poor loan performance from emerging farmers, I just don’t see how they do it.”

The bank said in a JSE statement that its asset quality on its loan book continued to improve, with nonperforming loans down to 5.8%, from 8.7% a year.

It said funding initiatives had been “very positive” and the bank’s reliance on short-term funding was reduced to 49%, which was below its mediumterm target of 50% set for March 2018.