Income Statement Commentary

• Net interest up 6%. Interest income up 15% in line with a 17% portfolio growth. This was diluted by a 15% increase in cost of funds on borrowings and deposits in line with the Group’s strategy to diversify our funding profile and growing the deposits base.
• NFI increased by 30% with income from insurance arrangements being the major contributor as the insurance structures in Namibia were set up in the latter part of 2020.
• Operating expenditure up 12%. This is in line with continued investment on future capability on robotics, data analytics and process automation.
• Impairment release and an LLR of -0.1 were driven by a once off recovery of a single party exposure in East Africa.
• ETR at 36% and down 3% from prior year. This was driven by a 11% increase in the Group’s profit which was propelled by a 30% increase in non-funded income (mainly insurance arrangements).

Balance Sheet commentary

• Strong Cash and cash equivalents up 45% year on year depicting healthy cash flow and liquidity position.
• Net Advances to customers up 17% year on year driven by a 43% increase in net disbursements.
• Customer deposits growth of 77%. The growth was triggered by strengthening partnerships at institutional levels and the development of the LetGoPay ecosystem in the digital mall.
• Borrowings up 31% with strong pipeline and continued focus on changing the deposit mix and sourcing long term funding.
• Shareholder funds strong at P5.07 billion and up 16% year on year.

Expected Credit Losses (ECL): Reduced Impairment Coverage

Key Highlights

• Overall impairment coverage reduced to 4.6% in 2021 ( 5.4% in Dec 2020) at the back of P76million provision release for a single party exposure in East Africa.
• Loan loss rate moving to -0,1% from 0.3% full year 2020, with increase in Gross advances that increased from P10.74 billion in 2020 to P12.4billion in 2021.
• Stage 1 – Growth in DAS portfolios on the back digitisation strategy and introduction of individual lending in Botswana at the back of credit scoring implementation.
• Stage 2 – Increase in accounts having significant increase in credit risk at the back of sectoral risk in MSE portfolio.
• Stage 3 – Increase driven by impact of 3rd wave on MSE portfolio. Investments in collections and recoveries continues.

What we watch…

• Fluid macro environment in our footprints – challenging prospects for economic recovery, rising public debt and inflation and pressure on currencies and policy rates
• Elevated geopolitical tension – fallout from Russia/Ukraine conflict and potential contagion effect
• Evolution of COVID-19 flare ups and future pandemics
• Political risks in some of our footprints – Upcoming elections in Kenya (2022) and Nigeria (2023)
• Government action – Inherent potential for policy changes in deduction codes and public service rationalisation
• Digital infrastructure maturity and rising cyber risk vulnerabilities

Download the Full Presentation
Letshego Holdings FY2021 results presentation.pdf