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Audited results for the year ended 31 March 2014
The Development Bank of Southern Africa
Audited results for the year ended 31 March 2014
Preparation of the financial statements
The following individual was responsible for the preparation of the financial
statements for the year ended 31 March 2014:
Kameshni Naidoo CA (SA), Chief Financial Officer
Basis of preparation
Accounting policies adopted and methods of computation are consistent with
those applied to the annual financial statements at 31 March 2013. The
financial statements are prepared on the historical cost basis except that
the following assets and liabilities are stated at their fair value:
derivative financial instruments, financial instruments at fair value through
profit and loss, available-for-sale financial assets, land and buildings,
post-retirement medical benefit and funeral benefit obligations measured at
actuarial values. The financial statements are in conformity with IFRS.
The preparation of the financial statements require management to make
reasonable judgments, estimates and assumptions that affect the application
of accounting policies and reported amounts of assets and liabilities, income
and expenses. Actual results may differ from these estimates.
Audit of results
The financial results of DBSA for the year ended 31 March 2014 have been
audited by the Bank’s auditor, Nkonki Inc. In their audit report, which is
available for inspection at the Company's Registered Office, Nkonki Inc.
stated that their audit was conducted in accordance with International
Standards on Auditing, and have expressed an unmodified audit report on the
year-end financial statements.
Key Highlights for the year
- Record disbursement of R12.7bn (31 March 2013: R9bn) main contributor
to Development bonds and loan book net growth of 19% from 31 March
2013.
- Significant turnaround in profitability for the year R787 million (31
March 2013: Loss R825 million).
- Cost to income ratio 28.4% (31 March 2013: 48.9%).
- Net interest margin 45.6% (31 March 2013: 40%).
- Cash flow from operations R1.9bn (31 March 2013: R794 million).
- Capital injection received from National Treasury of R2.4bn in support
of the new growth strategy.
Overview of the Financial results and activities
The Bank continues to implement its new business strategy and the key
financial indicators for the year under review are:
- Operating income increased by 23 percent to R2.3 billion (2012/13: R1.9
billion) on the back of an increase in net interest income (2013/14:
R2.1 billion, 2012/13: R1.6 billion) despite an increase in losses on
financial assets and liabilities (2013/14: R629 million; 2012/13: R403
million).
- Cost-to-income ratio improved significantly to 28.4 percent (2012/13:
48.9 percent.The DBSA has seen a favourable decrease in its cost-to-
income ratio due to the combination of a decrease in operating expenses
and decrease in Development Fund expenses and an increase in net fee
income, other income and net interest income.
- DBSA returned to profitability with net income of R787 million compared
to a loss of R826 million in 2012/13.The DBSA recorded a profit for the
year largely, in addition to the above figures, attributable to a
decrease in net impairment losses on financial assets (2013/14: R735
million, 2012/13: R1.6 billion).
- Development loans, bonds and equity investments disbursements of R12.7
billion, an increase of 39.1% compared to the R9.2 billion disbursed
during 2012/13.
- Provision for loan impairment increased by: 2 percent R2.4 billion
(2012/13: R2.3 billion) although the provision for loan impairment
increased, the quality of the loan book remains within acceptable
parameters with non-performing loans at 5.8 percent of the total loan
book (2013: 7.3 percent).
- Debt-to-equity ratio improved marginally to 216.3 percent (2012/13:
217.4 percent).
- The National Treasury in support of the new strategy and growth
prospects provided a capital injection of R2.4bn during the period
under review, being the first tranche of the R7.9bn capital injection
commitment.
- The organisational restructuring of the DBSA was completed during the
year. The restructuring exercise was a challenging but necessary step
in ensuring the Bank’s future financial sustainability and desired
return on development impact. Appropriate measures to improve the long-
term financial sustainability of the Bank are currently in
implementation.
Statement of Financial Position as at 31 March 2014
in thousands of rand 2014 2013
Assets
Cash and cash equivalents 4 135 667 1 252 142
Other receivables 145 296 148 386
Investment securities 2 161 341 3 435 922
Derivative assets held for risk management 1 308 325 1 422 719
Post-retirement medical benefits investment 63 209 64 848
Home ownership scheme loans 7 544 8 932
Equity investments 4 610 448 4 455 721
Development bonds 772 743 -
Development loans 50 076 235 42 619 769
Property and equipment 461 873 470 298
Intangible assets 82 860 86 499
Total assets 63 825 541 53 965 236
Liabilities
Other payables 813 665 796 594
Provisions 55 998 151 009
Liability for funeral benefits 3 100 4 300
Liability for post-retirement medical benefits 165 051 48 421
Funding: debt securities 29 216 814 25 790 079
Funding: lines of credit 13 606 441 10 081 507
Funding under repurchase agreements - 201 752
Derivative liabilities held for risk management 63 899 85 849
Total liabilities 43 924 968 37 259 511
Equity
Share capital 200 000 200 000
Retained earnings 11 296 416 11 031 631
Permanent government funding 6 192 344 3 792 344
Revaluation reserve on land and buildings 253 487 253 487
Hedging reserve 61 958 40 617
Reserve for general loan risks 1 893 983 1 371 726
Fair value reserve 2 385 15 920
Total equity 19 900 573 16 705 725
Total liabilities and equity 63 825 541 53 965 236
Statement of Comprehensive Income for the year ended 31 March 2014
in thousands of rand 2014 2013
Interest income 4 576 209 4 068 007
Interest expense (2 487 759) (2 441 908)
Net interest income 2 088 450 1 626 099
Net fee income 334 630 188 010
Net foreign exchange gain 279 945 346 978
Net loss from financial assets and financial liabilities (629 496) (403 157)
Other operating income 244 074 124 092
Other income 229 153 255 923
Operating income 2 317 603 1 882 022
Project preparation (20 867) (13 444)
Net impairment loss on financial assets (734 871) (1 605 632)
Personnel expenses (561 597) (654 307)
Other expenses (177 597) (274 011)
Depreciation and amortisation (18 627) (19 378)
Income/(loss) from operations 804 044 (684 750)
Grant to DBSA Development Fund - (119 665)
Grants (17 001) (21 499)
Income/(loss) for the year 787 042 (825 914)
Statement of Other Comprehensive Income for the year ended 31 March 2014
in thousands of rand 2014 2013
Income/(loss) for the year 787,042 (825,914)
Loss on revaluation of land and buildings - (1,601)
Net unrealised gain on cash flow hedges 109,108 59,866
Net losses on cash flow hedges reclassified to statement of
comprehensive income (87,767) (56,970)
Change in value of available-for-sale financial assets (13,535) 2,772
Other comprehensive income 7,806 4,067
Total comprehensive income/(loss) for the year 794,848 (821,847)
Summarised Statement of Cash Flows for the year ended 31 March 2014
in thousands of rand 2014 2013
Net cash generated from operating activities 1 955 167 794 049
Net cash used in development activities (7 820 810) (2 071 609)
Net cash generated from investing activities 319 679 38 087
Net cash generated from financing activities 8 475 037 375 427
Net increase/(decrease) in cash and cash equivalents 2 929 073 (864 046)
Effect of exchange rate movements on cash balances (45 548) 3 034
Movement in cash and cash equivalents 2 883 525 (861 012)
Cash and cash equivalents at the beginning of the year 1 252 142 2 113 154
Cash and cash equivalents at the end of the period 4 135 667 1 252 142
The 2013/2014 Integrated Annual Report is available on the DBSA website
www.dbsa.org
Issued by the Development Bank Of Southern Africa
Dated: 15 September 2014
SBSA (Debt Sponsor) Zoya Sisulu (011) 721 6032
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