Rabu, 17 Februari 2010

PRESS RELEASE: Fitch Affirms South Africa's Land Bank AA(zaf)

Fitch Ratings-London/Johannesburg-20 April 2009: Fitch Ratings has today affirmed the Land and Agricultural Development Bank of South Africa's (Land Bank) National Long-term Rating at 'AA(zaf)' with a Stable Outlook, and its National Short-term Rating at 'F1+(zaf)'. Fitch has affirmed Land Bank's Support Rating at '2'.

Land Bank's National ratings are solely derived from the high perceived level of support that it would receive from its 100%-shareholder, the South African government (which has a Longterm foreign currency Issuer Default Rating (IDR) of 'BBB+' and a Long-term local currency IDR of 'A' with Negative Outlooks) if required. Support is also demonstrated by a ZAR1.5bn capital maintenance guarantee from the South African government which expires on 31 December 2009, and ZAR700m of capital which was injected during FY08 to help revive the bank and to assist its development mandate. In line with previous years, management expects that the capital maintenance guarantee will be renewed and extended.

Land Bank's financial performance is weak. The institution has a history of operating losses which stem from weak risk management and poor internal controls. Fitch notes that several senior management positions that oversee the organisation's key risks remain vacant, increasing the institution's potential risk exposure. Fitch expects Land Bank to report a modest profit during FY09 primarily as a result of the recovery of non-performing loans. However these results are also expected to be negatively impacted by a contracting loan book and fair value losses on equities and other financial instruments.

Given its development mandate, Land Bank has concentrated credit exposure to the agricultural sector. Further concentrations are evident by single obligor. Asset quality is weak, with high levels of non-performing loans. Funding is concentrated, with a sizeable proportion of funding attributable to a public sector institution.

Fitch considers the institution's capital to be low in light of its weak asset quality, concentration to single obligors, poor financial performance and low liquidity. This is partially mitigated by the capital maintenance guarantee. Land Bank remains a significant player in the South African agriculture sector in supporting economic growth through the provision of retail, wholesale, project and micro-finance services.

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