The Development Bank of Southern Africa (DBSA) said on Monday it expects to remain profitable in its year to end-March 2020, but is concerned that some clients will struggle to repay loans as Covid-19 weighs on economic activity.
The group expects profit to be lower than the R3.1bn net profit it made in its 2019 year, but development loans are expected to increase about R6.6bn, or 75%, from 2019.
In January, the DBSA confirmed it had given struggling SAA a R3.5bn loan.
Given the deterioration in South Africa’s economy, the Bank expects a rise in expected credit loss provisions as clients become affected, it said in a trading update, referring to the ability of clients to repay loans.
“However, forecasting under the current environment is complex and expected credit loss provisions have a high variability potential because of the influence from the developing economic recession and recovery prospects,” the group said.
“Notwithstanding the disruption of the local fixed-income market, the DBSA has been successful in raising funding from international development finance institutions as well as international and local commercial banks,” the group said.
The Bank’s debt-to-equity level for March 2020 is expected to remain significantly below its regulated debt-to-equity ratio cap of 250%, the group said.
The DBSA’s results are scheduled for release on September 30.
DBSA expects profits to fall in 2020 amid Covid-19
The Development Bank of Southern Africa (DBSA) said on Monday it expects to remain profitable in its year to end-March 2020, but is concerned that some clients will struggle to repay loans as Covid-19 weighs on economic activity.
The group expects profit to be lower than the R3.1bn net profit it made in its 2019 year, but development loans are expected to increase about R6.6bn, or 75%, from 2019.
In January, the DBSA confirmed it had given struggling SAA a R3.5bn loan.
Given the deterioration in South Africa’s economy, the Bank expects a rise in expected credit loss provisions as clients become affected, it said in a trading update, referring to the ability of clients to repay loans.
“However, forecasting under the current environment is complex and expected credit loss provisions have a high variability potential because of the influence from the developing economic recession and recovery prospects,” the group said.
“Notwithstanding the disruption of the local fixed-income market, the DBSA has been successful in raising funding from international development finance institutions as well as international and local commercial banks,” the group said.
The Bank’s debt-to-equity level for March 2020 is expected to remain significantly below its regulated debt-to-equity ratio cap of 250%, the group said.
The DBSA’s results are scheduled for release on September 30.
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