DBSA Stellar Performance Continues in a Challenging Environment

Johannesburg, 13 August 2024 - The DBSA, has published its financial results for the year ended 31 March 2024 on the JSE Limited’s Stock Exchange News Service (SENS). These results, prepared in accordance with International Financial Reporting Standards (IFRS), provide comprehensive financial information to the holders of the Bank’s listed debt securities. The annual financial statements and annual report for year ended 31 March 2024 are available on the DBSA website: https://www.dbsa.org/investor-relations.

Context of financial performance

The Bank has demonstrated strong performance and continues to be resilient amid a slow economic growth, global inflationary pressures, and geopolitical tensions. In South Africa, subdued economic growth is expected to persist given the energy security and reliability challenges, logistical constraints, and inflation. The long-standing slow implementation of structural reforms to respond to high unemployment, crime and inequality, power shortages, and logistical challenges that are creating productivity and trade bottlenecks remains a concern. Facilitating the resolution of the municipality sector challenges which include the poor revenue collections, weak financial management and governance challenges remains among the DBSA’s strategic focus areas.

Despite these challenges, the DBSA remains focused on stimulating development, fostering partnerships, and mobilising resources to address developmental challenges across Africa. The Bank's growth strategy is centered on achieving sustainable development outcomes through infrastructure development and strategic partnerships.

Financial performance highlights

Solid earnings and profitability

• Net interest income increased by 18% to R7.7 billion (2023: R6.5 billion).
• Operating income of R7.8 billion (2023: R7.9 billion).
• Net profit of R4.6 billion (2023: R5.2 billion).
• Sustainable earnings increased by 7% to R4.5 billion (2023: R4.2 billion).
• ROE on sustainable earnings 9.0% (2023: 9.3%).
• ROE on net profit 9.3% (2023: 11.5%).

Effective cost optimisation

• Cost-to-income ratio improved to 21.0% (2023: 23.5%).

Asset growth and strong disbursement levels

• Total assets increased by 9% to R118.3 billion (2023: R108.6 billion).
• Gross Development loans and bonds increased by 6.5% to R115 billion (2023: R108 billion).
• Disbursements increased by 24% to R17 billion (2023: R13.7 billion).

Strong cash collections from the loan book.

• Total loan book repayments (collections from clients) increased by 28% to a new record of R23 billion (2023: R18 billion).
• Cash flow from operations increased to R5.4 billion (2023: R5.1 billion).

Resilient asset quality

• Gross NPL ratio of 3.9% (2023: 3.2%) below policy limits.
• Net NPL ratio of 1.5% (2023: 1.1%).
• Expected credit loss charge for the year increased to R1.4 billion (2023: R1.1 billion).

Capital adequacy and leverage ratios.

• Debt-to-equity ratio excluding R20 billion callable capital of 123% (2023: 124%).
• Debt-to-equity ratio including R20 billion callable capital 89% (2023: 87%). The debt- to- equity ratio is within the regulatory limit of 250%.

Callable capital refers to authorised but unissued shares.

Income statement commentary

The DBSA continues to operate financially sustainably despite a challenging environment marked by high interest rates, subdued economic growth, worsening sovereign debt position of several African countries and challenges in the municipal and logistics sectors. The Bank’s net profit decreased by 11.5% to R4.6 billion (2023: R5.2 billion), primarily due to lower foreign currency gains. However, the Bank’s sustainable earnings which exclude currency exchange gains or losses increased by 7% from R4.2 billion to R4.5 billion due to double digit growth in net interest income. The DBSA predominantly lends in USD and Euro to fund projects outside of South Africa. The net interest income increased by 18%, resulting from resilient loan book performance, growth in the loan book, solid capital structure, high interest rates and cost optimisation within the treasury funding activities. Further, the Bank remains efficient in managing operational costs and the cost optimisation strategy continues to be effective, with the cost-to-income ratio improving to 21% from 23% in the prior year.

Balance sheet commentary

The total asset base increased by 9%, driven by higher disbursements and funding activities. The Bank's loan and bond asset quality remained resilient, with strong governance within credit granting practices, proactive portfolio management and conservative provisioning strategies in place. The unlisted equity investment portfolio saw a slight decline due to negative fair value adjustments and capital redemptions, offset by new disbursements and currency movements. The Bank’s liquidity and capital position remains robust, with the Bank’s total equity base increasing by 9.2% from R47.6 billion to R52 billion. Total cash holdings at year end amounted to R10.8billion.

Development impact performance

The DBSA continues to make significant contributions to development, impacting education, local employment, infrastructure delivery, and small business support.

Highlights include:

• R2.5 billion infrastructure unlocked for under resourced municipalities.
• 4 375 learners benefited from six newly built schools.
• 14 755 learners benefited from 18 refurbished schools.
• 47 901 Learners benefited from 73 Limpopo DBE ablution facilities constructed.
• 1 308 local SMMEs and subcontractors employed in the construction projects.
• R4.1 billion worth of infrastructure delivered by black-owned entities of which R2.3 billion was delivered by black women owned entities.
• 31 638 temporary and permanent jobs facilitated.

Conclusion

Despite the challenging economic and operating environment locally and globally, a strong leadership and management team has steered the Bank through these challenges, whilst following the principles of good corporate governance. The DBSA remains committed to driving sustainable development across Africa. The Bank's robust financial performance and strong balance sheet serves as solid foundation in driving the strategic initiatives which ensures DBSA continues to play an important role in addressing developmental challenges and unlocking the full potential of the African continent.

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