The beleaguered Land Bank snuck through a horrible set of results shortly after the market closed early at 12pm on New Year’s Eve, revealing an annual total comprehensive loss of more than R2.8bn for the year ended March 31 2020, while non-performing loans almost doubled to 18.1% of total gross loans.
The loss widened 211% from the R902m restated loss it posted the previous fiscal year, while cash reserves plummeted almost 94% to R700m, down from R3.2bn the prior year, according to results posted on its website on Thursday.
The state agricultural lender’s non-performing loans almost doubled to R8.18bn, accounting for 18.1% of its total gross loan book of R45.142bn. That compares to non-performing loans of R4.35bn in the previous fiscal year when they comprised 9.6% of total loans.
“Fiscal year 2020 has been a challenging year for Land Bank,” the lender said in its results, citing a litany of reasons that included rating downgrades, poor book quality, low liquidity levels, a deteriorating economic environment, Covid-19, livestock diseases, drought and resignations in key posts.
In April 2020, Land Bank, SA’s biggest agricultural lender, defaulted on loan repayments to holders of R50bn of its bonds. The default affected holders of its 2010 note programme, which is worth R20bn, as well as its 2017 note programme, which is R30bn in size. It also slashed lending by about two-thirds in the five months to end-September as it tried to stave off a liquidity crisis.
In its results statement released on Thursday, Land Bank revealed that it had received a “disclaimed opinion” on its 2020 financial audit from the auditor-general (AG). The AG’s “disclaimed opinion” cited Land Bank’s delay in finalising a restructuring process amid negotiations with creditors, which is required to remedy its debt default.
The AG also mentioned Land Bank’s “weakened control environment” and its inability to recalibrate expected credit loss models since their development and implementation in 2016.
“I was unable to confirm whether the entity’s financial statements achieve fair presentation in accordance with International Accounting Standard (AS 1) — presentation of financial statements — as management was unable to provide the assessment of the entity’s ability to continue as a going concern,” the AG said in a statement to parliament dated December 18, which was posted on Land Bank’s website. This statement related to Land Bank’s results for the year to end-March 2020.
“I was unable to obtain sufficient appropriate audit evidence that management had properly accounted for expected credit losses,” the AG said. “I was unable to obtain sufficient appropriate audit evidence that collateral held as security was properly accounted in accordance with the requirements of IFRS 7, Financial Instruments: Disclosures.”
The AG went on to say that Land Bank’s management “did not prepare financial statements supported and evidenced by reliable information; did not adequately oversee financial reporting, compliance and related internal controls”; and “did not, in all instances, review and monitor compliance with applicable laws and regulations”.
Oddly, Land Bank also released unaudited interim results for the six-months to end-September 2020 on Thursday, which showed a R172m loss from continuing operations. However, the bank’s cash position had remarkably recovered to R7.306bn for the period, which it put down largely to a R3bn cash injection from the Treasury, as well as collections from customers and lower disbursements.
It also said total gross loans had decreased to R41.2bn in the interim period due to repayments and declining advances. However, non-performing loans still amounted to R8.026bn for the period, or 19.5% of total gross loans.
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