Swaziland Building Society paid out E35m dividends
MBABANE – Swazi Building Society paid out E35 million as dividends. A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders.
This was after its capital adequacy improved. According to the Central Bank of Eswatini’s fifth edition report, “The Society’s risk asset ratio stood at 32.7 per cent as at end June 2021 while the leverage ratio stood at 55.2 per cent.”
Capital and reserves continue to improve from E1.54 billion recorded in June 2020 to E1.56 billion by the end June 2021.
Meanwhile, paid-up share capital of which a huge chunk (96.4 per cent) is permanent shares constitutes 65.7 per cent of the capital and reserves.
Retained earnings, it was stated have the highest loss absorption ability and account for 25.1 per cent.
However, asset quality of the bank is not looking good. “Asset base shrunk by 3.1 per cent during the year and total assets amounted to E2.8 billion in June 2021,” stated the report. It further explained that net loans and advances were a major share of assets at 60.5 per cent, followed by investments at 22.2 per cent while placements with other banks stood at 2.7 per cent.
The Society’s lending was concentrated towards mortgages. This sector represented 67.1 per cent of lending by the Society. NPLs to total loans increased from 17.9 per cent to 19.3 per cent during the period under review. The mortgage sector contributed 62.4 per cent towards non-profit loans (NPLs) emphasizing the significance of this portfolio in the Society’s books.
It also worth-noting that household NPLs are anticipated to continue on an upward trajectory despite the accommodative monetary stance on the back of weak economic activity which could manifest in lowered household income.
Moreover, disposable income is expected to undergo strain with upward inflationary pressures in the economy, therefore impairing the ability of house holds to meet their loan obligations.
Despite the decrease in asset quality, the Society was profitable. “It accumulated E48 million in profits, even though it was far less than the E110.7 million recorded in the previous year,” the report stated.
The decline was attributable to the low economic activity as a result of COVID-19 and the investments undertaken by the Society in increasing its footprint. The return on assets and return on equity stood at 1.7 per cent and 3.1 per cent respectively for the period under review.
“From the profits, the Society paid out E35 million as dividends. The Society’s cost management strategies deteriorated during the year. As a result, the cost to income ratio worsened from 50.1 per cent to 77.5 per cent.”
The bank’s main source of income is from loans, revealed the report. Interest from loans contributed 53.1 per cent to total income while charges, fees and commissions contribute 29.8 per cent.
The Society maintained an acceptable level of liquidity. The report also said, “The liquid assets to total deposits ratio improved from 35.4 per cent recorded in June 2020 to stand at 38.8 per cent in June 2021. Liquid assets to total assets also improved from 15.5 per cent and settled at 16.3 per cent. The total loans to total deposit ratio stood at 154.2 per cent, showing that the
Society uses sources of funding (permanent shares) other than deposits to finance their lending. Total capital and reserves funded 55.7 per cent of total assets while customer deposits funded 41.9 per cent of assets.”