… COVID-19, bad loans and ageing systems blamed for profit decline
… Bank invests E137 million to modernise technology and.. strengthen cybersecurity
… MD says transformation will position Eswatini Bank for long-term growth and national development
BY MBONGENI NDLELA
MBABANE – Eswatini Bank Managing Director Dr Nozizwe Mulela has defended the bank’s recent financial performance, saying the institution’s decline in profitability is the price of an ambitious transformation programme aimed at securing its long-term future in an increasingly digital and competitive banking landscape.
Addressing editors during a media engagement at Sibebe Resort on Thursday, Dr Mulela said the bank’s latest financial results should not be viewed simply as a story of reduced profits, but rather as the outcome of a strategic investment programme that is modernising one of the country’s oldest financial institutions.
The engagement followed the publication of the bank’s audited financial statements earlier this week, which reflected a negative profitability position. Dr Mulela said it was important for the bank to explain the figures openly and provide context behind the numbers.
She explained that Eswatini Bank occupies a unique position within the country’s financial sector because it carries two distinct mandates.
On one hand, it operates as a commercial bank providing savings, loans and transactional banking services. On the other, it serves as a development finance institution responsible for supporting national development projects and contributing to the country’s economic growth agenda.
“This creates a balancing act that many commercial banks do not face,” she said.
“Our responsibility is not only to generate profits but also to support the country’s development objectives.”
Dr Mulela explained that development banking and commercial banking operate under completely different funding models and priorities.
While commercial banks mainly rely on customer deposits and focus on shareholder returns, development finance institutions typically finance long-term national projects whose economic impact may only become visible years later.
She said understanding this distinction was crucial when evaluating Eswatini Bank’s financial performance.
The Managing Director identified the COVID-19 pandemic as the turning point that exposed major weaknesses in the bank’s operations.
Before 2020, she said, the institution had recorded several consecutive years of profitability.
However, the pandemic fundamentally changed customer expectations while exposing the limitations of the bank’s ageing technology infrastructure.
“When COVID arrived, we realised that the traditional way of banking was no longer sufficient,” she said.
“The world changed overnight.”
She explained that customers increasingly demanded seamless digital banking services while many businesses faced severe financial distress, resulting in growing numbers of non-performing loans.
According to Dr Mulela, many customers who experienced financial difficulties during the pandemic continue to struggle with loan repayments even today.
Some businesses have since closed, while others have required loan restructuring to remain operational.
The continued burden of these legacy loans has weighed heavily on the bank’s financial performance over recent years.
Beyond customer challenges, the bank was also forced to undertake one of the most significant technology upgrades in its history.
Dr Mulela revealed that Eswatini Bank has already invested approximately E137 million in upgrading its information technology infrastructure.
The investment included replacing ageing hardware, strengthening cybersecurity systems and expanding digital banking capabilities to meet modern banking demands.
She said these investments were unavoidable.
“If we failed to modernise, we would simply fall behind the rest of the industry,” she said.
The Managing Director noted that banking across the world is rapidly evolving, with digital services becoming the primary channel through which customers interact with financial institutions.
She said the rise of fintech companies, open banking, mobile payment platforms and new banking licences has intensified competition across the financial sector.
Banks are no longer competing only with one another, but with a growing ecosystem of technology-driven financial service providers.
At the same time, customers have become more informed and expect faster, safer and more convenient banking experiences.
“The industry is evolving very fast and we must move with it,” she said.
Dr Mulela also highlighted broader economic pressures that have affected both the bank and its customers.
She cited climate change, rising production costs, inflation, geopolitical tensions, higher electricity tariffs and increased fuel prices as factors placing significant pressure on businesses.
Agriculture, mining and transport were among the sectors hardest hit during the financial year, affecting the repayment capacity of many borrowers.
She further noted that government fiscal constraints have also had an indirect impact on the bank.
Because many businesses depend on government contracts, delays in payments often translate into delayed loan repayments, increasing credit risk for financial institutions.
“The environment has been extremely challenging,” she observed.
Despite these difficulties, Dr Mulela stressed that the bank remains committed to supporting businesses while carefully managing financial risk.
She acknowledged that operational costs have risen sharply during the transformation proceris
In addition to investing in technology, the bank has recruited specialised digital skills and strengthened cybersecurity following growing threats targeting financial institutions.
She explained that every electronic transaction involves multiple payment processing partners whose services come at significant cost.
These expenses, combined with ongoing technology investments, have pushed the bank’s cost-to-income ratio higher.
However, she insisted these costs represent strategic investments rather than unnecessary expenditure.
The Managing Director cautioned against expecting immediate financial returns from digital transformation.
She said new banking products often require several years before achieving meaningful market penetration and generating sustainable revenue.
“The returns do not come immediately after the investment,” she explained.
“They require patience.”
She likened the transformation programme to renovating an old house, arguing that meaningful renovation cannot be achieved through small piecemeal repairs.
Instead, she suggested that comprehensive investment supported by shareholders offers a more effective path towards long-term sustainability.
Looking ahead, Dr Mulela said the bank’s transformation journey is far from complete.
Having strengthened its technology infrastructure, Eswatini Bank is now focusing on automating hundreds of internal business processes to improve operational efficiency and customer experience.
The Institution is also exploring the acquisition of a new core banking system capable of supporting future growth and more advanced digital services.
She expressed confidence that the investments currently weighing on profitability would eventually position the bank for stronger financial performance and improved service delivery.
“Our focus is to build a stronger, more resilient and future-ready bank,” she said.
She concluded by emphasising that while the current financial results may appear disappointing, they reflect deliberate decisions to invest in long-term sustainability rather than short-term profits.
For Eswatini Bank, she said, the journey towards becoming a fully modern digital bank has required substantial investment, but one that management believes is essential if the institution is to remain relevant and competitive in the years ahead.
(Courtesy Pic)
