Title: Land Bank Corporate Plan 2005/06 Presentation: Portfolio Committee on Agriculture
1Land Bank Corporate Plan 2005/06Presentation
Portfolio Committee on Agriculture Land
Affairs
2Overview of Presentation
- Corporate Plan Overview
- The Turnaround Plan
- Financial Objectives
- Non Financial Objectives
- Questions and Comments
3 Land Bank Vision and Mission
- Land Bank Vision
- To be the leading provider of world-class
financial services to agriculture and related
rural sectors in South Africa - Land Bank Mission
- Land Bank is an agricultural development finance
institution that supports economic growth
through the provision of retail, wholesale,
project and micro-financial services to
agriculture and related rural services
4 Land Bank Accountability
- The State is the only shareholder, represented by
the Minister for Agriculture and Land Affairs - Our activities are governed by the Land and
Agricultural Development Bank Act, 2002 (Act no.
15 of 2002) and financial management guidelines
provided by the Public Finance Management Act
(Act no. 29 of 1999)
5 Land Bank Strategic Framework
- Our programmes are aligned with governments key
strategic programmes in the agricultural sector - Agricultural Sector Plan
- Integrated Sustainable Rural Development
Programme - Comprehensive Agricultural Support Programme
(CASP) - Shareholder Compact
6 - The Land Bank Corporate Plan 2005/06
- George Oricho
- GM Strategy
7Land Bank Priorities
- Implement more effective banking and financial
business systems - Implement processes and actions to ensure best
practice and compliance with AC133 - Reposition the Bank to grow the commercial and
development books - Increase focus on financing BEE transactions, in
terms of the Agri-BEE framework
8Land Bank Priorities
- Completing the Business Process Review by
November 2004, to ensure - Improved productivity
- Streamlined operations and
- Enhanced customer service
- Consolidate the management team
- CEO candidate identified -- appointment process
close to finalization - Senior management positions to be filled by
November 2004 - Continue to support Governments priority
programmes - Land reform
- Agricultural credit scheme
- Food security
9Important Economic Developments
- Drought and delayed rains in Western Cape has a
major negative impact on the agricultural sector - Strong rand causes great difficulty for
agricultural exporters such as wine and citrus
producers - Grain prices are extremely low, especially
serious for maize producers - Carryover stocks in wine and maize sectors will
continue to put downward pressure on prices - Sugar industry is benefiting from strong
international sugar price
10Land Bank Strengths
- Land Bank has a well established brand name
- Excellent relationships have been established
with Provincial Governments - Staff has thorough knowledge of agriculture
- A tailored range of products are available at
competitive rates fees - Bank is regarded as loyal to the agricultural
sector, friend in good and bad times - Branch offices offer local decisionmaking
11Land Bank Weaknesses
- Retail has relatively high delivery costs
- Limited product range in a single, high risk
sector - Lack of satisfactory computer information system
- Insufficient outreach in deep rural areas
- Turnaround times are excessive
12Land Bank Opportunities
- Client base will be broadened through MAFISA,
AgriBEE and other shareholder initiatives - Footprint can be extend through co-op and
agribusiness network - BEE acquisitions are business opportunities
- Can develop innovative modern products for old
and new markets - Land redistribution initiatives offer new
possibilities - New tailored information system will increase
market and service opportunities
13Land Bank Threats
- Loss of preferred status through revisions to the
Land Bank Act - Loss of staff expertise
- Workforce that lacks tools, motivation, training
- Bad debts resulting from adverse economic or
climatic conditions - Expectations that are not achieved in reasonable
timeframe - International competitors in the face of
increased variability in net farm income and
increased cost of debt
14 - The Land Bank Turnaround Plan
-
15Commercial Loan Book,Trend Line and March 2005
Target
16Development Loan Book,Trend Line and March 2005
Target
17Arrears Amounts, Trend Line and March 2005 Target
18Non Performing Loan Balances, Trend Line and
March 2005 Target
19Return on Assets, Trend Line and March 2005
Target
20Net Interest Margin, Trend Line and March 2005
Target
21Efficiency Ratio, Trend Line and 2005 Target
22Capital Adequacy, Trend Line and March 2005
Target
23The Capital Adequacy Issue
- Land Bank capital has been reduced significantly
due to bad debt write-offs and the adoption of a
new accounting standard known as AC133 - This reduction impacts the financial ratios used
by investors to assess the credit worthiness of
the Bank - Erosion of capital results in a loss of investor
confidence in the Banks ability to withstand any
future financial shock
24Sources of Potential Shock
- Prolonged or severe drought,
- Financial failure of one or more large borrowers
- Persistent low commodity prices
- A large drop in land values used as security for
loans - Adverse consequences resulting from additional
changes in accounting treatment - Continued strong rand
25The Capital Adequacy Issue
- Historically Land Banks capital adequacy has
been kept above 15 - In the past two years the ratio has fallen well
below 15. - To provide sufficient cushion for possible future
adverse events and to restore investor confidence
in the financial strength of the Bank, a prudent
capital adequacy level would be at least 20
26Land Bank Role in Agricultural Transformation
- The BEE transactions and other empowerment
projects being financed or currently being
considered for financing by the Banks CFU
business is approaching R3.7 billion - The current Retail book to start up farmers
amounts to R663 million - Step-Up adds another R74 million in loan volume
27Land Bank Role in Agricultural Transformation
- Since the Bank serves as one of the instruments
of Governments effort to encourage and support
black economic empowerment in agriculture, it is
important that the Banks capital adequacy
position be sorted out as a matter or urgency. - A higher capital adequacy ratio will improve the
credit rating and dampen investor fears regarding
the risk of lending funds to the Bank.
28The Capital Adequacy Issue
- An appropriation of R2 billion will increase
capital adequacy ratio to nearly 20 - Is adequate to shore up Banks financial strength
and restore investor confidence - A capital injection will require Bank to
implement a turnaround plan to ensure - profitability is maintained
- sustainability is ensured
- capital adequacy is maintained
29The Turnaround Plan
- Improving Management Capacity
- Skills and experience
- Organisational Structure
- Training and development
- Selection, recruitment and retention of skills
- Reward, recognition and incentives
- Performance management
- Culture and values
- Employment equity
- Developing appropriate business models
30The Turnaround Plan
- Enhancing Bank Revenue Model
- Pricing model
- Net interest income
- Non interest revenue
- Creating new loan products
- Creating non interest sources of revenue
- Increasing client satisfaction
- Understanding competitive environment and our
clients
31The Turnaround Plan
- Controlling Costs
- Cost to income ratio, operating efficiencies and
increasing productivity - Loan book quality (Bad Debts)
- Funding costs
- Non interest costs
- Expense reduction
32The Turnaround Plan
- Installing Information Systems and Processes
- Implementation of Banking Solution
- Reliable management information
- Action plan management information
- Improve client interface and integration
- Enabling environment to manage risk and
compliance
33The Turnaround Plan
- Managing Risk
- Market risk
- Interest rate risk
- Enterprise wide risk management
- ALCO process
- Credit risk, liquidity, market, operating,
- Banking risks and returns, profitability,
liquidity, and solvency
34The Turnaround Plan
- Managing and Protecting Capital
- Capital planning
- Return on capital, economic value added
- Development programme
- Engage treasury
- Capital injection
35 - The Land Bank
- Financial Objectives
-
36Loan Growth
37Business Efficiency
38Loan Quality
39Profitability
40Capital Adequacy
41 - The Land Bank
- Non Financial Objectives
-
42Non Financial Indicators
43 44 45(No Transcript)
46(No Transcript)