Letshego grows retail deposit clients

FINANCIAL services company Letshego Holdings Limited has grown their deposit clients base from 2 130 in 2018 to 12 460 in 2019, indicative that they still have a chance to becoming a fully fledged bank.

When they released their interim financial statement for 2019, deposit clients in monetary value had dropped by over 80% and this drop had triggered analysts to question whether Letshego would transform from being a micro-lender to a bank.

However, with the full provisional 2019 financial statements released last week, the numbers show a significant growth in deposit clients, accompanied by a growth in deposit taking branches.

Although the deposit client base has grown, the deposit value is still down at N$43 million in 2019, from an all high N$75 million in 2018 and N$90 million in 2017.

The N$43 million is, however, way higher than the 2019 interim balance that stood at only N$14 million.

According to the provisional financials text, the reason why deposits reduced from N$75 million to N$43 million in 2019 was a result of the company being more selective in institutional deposits accepted.

This selective banking caused their institutional deposits to massively drop from N$71 million to N$10 million, and this decrease caused the company to go hunting for new clients, and leap from 2 126 clients in 2018 to 12 459 in 2019.

“During the year, following our strategic refocus on mass retail deposit mobilisation, we grew our retail deposits from N$3 million in 2018 to N$33 million in 2019. This is expected to continue in 2020 as retail deposit mobilisation intensifies,” said the company.

The financials show that the group profit dropped by 3,8%, from N$468 million to N$451 million in 2019. The drop in profit is largely attributed to an increase in employee benefits and other operating expenses that are slightly higher than they were in 2018 and a decrease in operating income that now stands at N$229 million from N$255 million.

Advances to clients grew by 14%, from N$2,5 billion in 2018 to N$2,9 billion in 2019. Although there is an increase recorded in the advances balance, total assets were down to N$3,3 billion from N$3,4 billion in 2018, which is mainly from cash and cash equivalents that dropped by 67%, ending the year at N$243 million.

The company remains at 91% capital adequacy and a retained earnings balance at N$1,4 billion.

Total liabilities also dropped by 4%, from N$594 million to N$572 million in 2019, which is good for the company’s financial health. The liabilities has been on a downward trend ever since the N$897 million loan conversion in 2018.

Commenting on the deposits decrease and selective deposits taking, chief executive officer Ester Kali said Letshego is committed to attracting and managing customer deposits, both retail and institutional, in line with their broader commercial strategies to diversify and reduce cost of funding.

“Our current capabilities underpin a greater competitive advantage in attracting retail deposits in the long term and hence our refocus. During 2019, select institutional depositors amended their commitments due to pricing considerations, and this led to a reduction of the total value of institutional deposit values,” she said.

The company said although there is a challenging and increasingly competitive environment, Letshego will continue to pursue their diversification agenda, and journey to becoming an inclusive finance provider.

The audited financial statements for 2019 are expected to be available towards the end of May.