Interim Report

Commentary on the unaudited results for the period ended 30 June 2020

Group position
12-month performance

The bank continued to improve its liquidity position as growth in its deposit-taking activities over the last 12 months increased by R713,1 million or 11,8% since June 2019. With the growth in deposits, surplus cash which is invested in Shariah-compliant equity finance and mudaraba deposits has increased by R480,9 million or 32,9%. During this period, the bank’s advances book also grew by R371,9 million or 7,6%.

Six-month performance
The deposit book growth for the six months ended 30 June 2020 has also been favourable, with a growth of R559,7 million or 9,1% to the end of June 2020, whilst the advances book has decreased marginally for the same period, based on scheduled repayments and the lack of demand brought about by the COVID-19 pandemic and its resultant impact on economic activity. Further details regarding the effects of COVID-19 are highlighted under ‘General’ below. The encouraging growth in the deposit book that has taken place for the year, coupled with the lack of demand in our advances business, has resulted in excess funds being available for investment in equity finance and mudaraba deposits for the year. Equity finance and mudaraba deposits have, therefore, had a significant growth of R761,7 million or 64,6% in the current year. The additional equity finance and mudaraba deposits were funded by increases in the deposit book, repayments received from advances dealing as well as a reduction in cash holdings for 2020.

The bank continues to work towards strong management of its capital reserves. In 2019, the bank issued a further R107,7 million Sukuk, over and above the already-subscribed value of R200 million.

Group performance
Income from advances and equity finance and mudaraba deposits increased by R9,6 million or 3,3% compared against the same period last year. There has been a significant increase in credit impairments in the current year, due to changes in the economic climate, which has resulted from the current COVID-19 pandemic. Credit impairments have increased by R7,4 million or 679,9% compared against the same period in 2019. After taking this into consideration, along with sharing with depositors the net income from funding income activities has increased by R1,8 million or 1,2% year-on-year.

Income from non-financing activities, being foreign exchange, unit trust sales, electronic banking fees and other fee income, have all decreased year-on-year based on the reduced demand created by the current lockdown in the country. Operating expenditure increased by R8,6 million or 7,0% year-on-year, driven mainly by higher employment costs and additional depreciation as a result of new capital projects implemented during the preceding 12 months, especially the introduction of a new core banking system in the 2020 financial year. After consideration of the above, the net effect is a decrease of R9,1 million or 28,0% in total comprehensive income in 2020 compared against the same period in 2019. This has resulted in basic and diluted earnings per share also decreasing by 28,0% for the same period.


As seen from the results, COVID-19 has negatively impacted the bank’s results, as is the case in many other industries. With the resultant impact on reduced market rates, the bank has also reduced its profit mark-ups in line with industry, which has affected the expected inflows from the advances business. In light of the difficulty facing clients and the potential for default, the bank has increased its provisions by 50,3% from December 2019. The bank has also granted payment deferments to clients on a case-by-case basis in order to assist them during this period. In addition, the bank’s non-funding income has dropped by 25,2% due to reduced fees, as a result of lower than expected advances transactions, a decline in the unit trust markets and a lack of travel activity affecting our foreign exchange business. Management is placing significant effort in identifying solutions to reduce costs to mitigate against the effects of the reduced income and significant increases in credit provisions that has resulted from the current situation. Management is confident that the bank will continue to be profitable in the 2020 financial year. However this will be significantly lower than the results achieved in the 2019 financial year.

For and on behalf of the Board
31 December 2020

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Interim Report 30 June 2020

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Page last updated: 2021-06-09