Annual Report 2016

42
CHIEF EXECUTIVE OFFICER’S REVIEW
43
Financial Overview: Stakeholders and Shareholders,
the bank has turned yet another corner on its
turnaround journey. The bank reported a net profit of
R4.9 million in the current financial year which translates
to a 376% increase when compared to the net profit of the
prior financial year. This is a great milestone for the bank
and that which I am proud of. The turnaround strategy of
the bank which was approved in the earlier part of 2014
has generated a total of R5.9 million to the bottom line
which signifies the success of the strategy. Total assets
of the bank have increased to R1 billion (156%) when
compared to the prior year. Since the turnaround strategy
started the assets have increased by 209%. The results have
been achieved during a challenging time in our country
where the reported growth in the economy has been less
than expected. We have also witnessed a steady increase
in the inflation rate which prompted the Reserve Bank
to hike the repo rate. Although this being advantageous
to the bank’s earnings, it increases the probability of
impairments increasing thereby reducing the profitability
of the bank.
Funding: During the course of the previous financial year,
the bank changed its funding strategy from just focusing on
deposits from the general public to also include sourcing
of funding from institutions and municipalities. This
was also necessitated by the low saving culture amongst
South Africans. This strategy yielded results as funding to
the tune of R280 million was raised from municipalities
and institutions in the current financial year. The market
competitiveness of this wholesale funding means that it
comes at a higher price than deposits from the general
public which then increases the interest that the bank has
to pay to these depositors.
During the year under review the bank drew down just
under R300 million from its PIC facility which enabled it
to improve both profitability and total assets. This facility
is aimed at financing fuel and energy related transactions.
Bank repositioning: During the financial year the bank
revamped its entire branch network and also relocated its
underperforming branch. This yielded results in drawing
customer feet into our branches thereby increasing public
deposits. We also managed to open our first ever branch
outside of the Vhembe region in the Johannesburg city
centre.Lending to corporates (SMEs) currently comprises
53% of the total lending book which is a shift from a
100% retail lending book of 2013. Our products are also
far reaching as we now have products spread in Gauteng,
Western Cape, Kwazulu-Natal and Limpopo.
Risk management: As a bank we believe in responsible
and sustainable lending. During the year under review the
management team went on a robust exercise of refining
and improving the bank’s policies and procedures. This
culminated in the introduction of a new and robust credit
policy that takes into account the South African market
conditions as well as occurrence that happen globally.
I would like to take this opportunity to thank the Chairman
of the Board, Mr Tshifhiwa Matodzi and his entire board for
the continued support, robust discussions and guidance.
I would also like to thank the PIC for their continued
financial support of the bank. To my hardworking staff,
goes my sincerest gratitude as these results would not have
never been achieved without them.
Mr A.M.A Ramavhunga
Chief Executive Officer
22 June 2016
Mr A.M.A Ramavhunga
Chief Executive Officer
Total Assets Loans and advances Capital and reserves Total client deposits
Value
Millions
1200
1000
800
600
400
200
Value
Millions
800
700
600
500
400
300
200
100
Value
Millions
160
140
120
100
80
60
40
20
Value
Millions
700
600
500
400
300
200
100
People With A Purpose
Year 12 13 14 15 16 Year 12 13 14 15 16 Year 12 13 14 15 16 Year 12 13 14 15 16