Land Bank requests turnaround strategy: Fitch
March 7, 2008
Land Bank's weak financial position is likely to deteriorate unless drastic measures are put in place, rating agency Fitch, said on Friday.
"In the absence of a clearly defined, well-structured turnaround strategy, together with new senior management appointments, Fitch believes that Land Bank will continue to struggle and there is a risk that its financial position could further deteriorate," it said in a statement.
The bank's funding formula did not cater for its long term needs.
"Fitch noted that Land Bank's funding had become increasingly short-term and is concerned that the use of short-term funding to finance longer-term assets could result in refinancing risk," the agency said.
Fitch was also concerned about the bank's capital reserves.
"The agency views Land Bank's capital as low given the credit quality of the loan book, its concentration to single obligors, poor financial performance and low levels of liquidity," the agency said.
However, the R1.5 billion guarantee the bank received from government in 2008 and the recent R700 million capital injection, would help ensure the bank survived.
Fitch added that Land Bank remained a significant player in the South African agriculture sector. - Sapa
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