Senior Business Reporter
THE current prevailing economic and financial stability has necessitated the need to return to fundamentals for both companies and investors in the country, an equities report notes.
At the close of 2020, there were a number of acquisitions, divestitures and mergers in the market, as companies took advantage of stability on the economic front as well as key fundamentals such as inflation and the exchange rate.
Buoyed by a successful 2020/21 agricultural season, strong mining growth and tourism resurgence, the Government reviewed upwards its economic growth projection for 2021 to 7,8 percent from the initially projected 7,4 percent.
“The current prevailing economic and financial stability has given rise to acquisitions and mergers on the stock market as businesses become more aggressive, consolidating upwards and downwards to create scale and improve efficiency,” IH Securities said in a banking sector report.
In 2020, the market witnessed the acquisition of ZB Bank by CBZ holdings.
The transaction was a result of NSSA disposing of its 37,79 percent ZB Financial Holdings (ZBFH) shareholding in exchange of CBZ shares worth $640 million, (US$7,8 million).
For the 50 percent consideration, NSSA received 14,341 million new shares, valued at $640 041 800 in CBZ representing 2,15 percent stake, while for the 50 percent cash transaction, NSSA received US$11 646 889 after factoring transaction costs.
The transaction saw NSSA, which also has investments in FBC (35 percent) and NBS (100 percent), increasing its shareholding by 2,15 percent in CBZ where it already has 16 percent shareholding.
“The decision by NSSA to dispose of ZB Bank shares was on the back of inconsistent dividends and an underperforming share price resulting in the investment company freeing its funds so as to preserve value for pensioners,” the report noted.
‘‘Earlier this year, the National Social Security Authority announced its intention to reduce its stake in First Mutual Holdings Limited (FMHL) from the current 66,22 percent to 35 percent through offloading up to 31,22 percent to a strategic partner.”
This move will see NSSA be in compliance with regulatory requirements, while bringing in a strategic investor with solid financial resources, synergistic, technical and strategic benefits to enhance the growth prospects of the First Mutual Group.
Of late, a significant number of NMB Holdings shares exchanged hands in what seems to indicate the entrant of a sizable buyer. A total 6,61 million shares worth $72,74 million were traded on the Zimbabwe Stock Exchange early August.
Another notable transaction within the industry is the buying back of shares by FBC from shareholders.
The Group’s board of directors authorised the repurchase of 47 949 688 of its ordinary shares from ShoreCap II Limited, now held under the FBCH Share Buyback Scheme for subsequent resale to potential strategic investors.
This represents 7,14 percent of the issued share capital of FBC Holdings Limited and brings the total treasury shares acquired through the FBC Share Buyback Scheme to 7,52 percent of the issued share capital of the Group.
IH Securities noted that apart from consolidations, the banking industry is likely going to see another player listing on the stock exchange, amid indications that the People’s Own Savings Bank (POSB) has submitted a proposal to Cabinet for the listing of the bank on the local bourse.
According to company executives, the proposal for the listing of the bank on the stock exchange is likely to be finalised during the second half of 2021.
“We expect to see a continued trend of corporate activity in the banking sector as players try to optimise scale and efficiencies through consolidations and potential divestitures as well.
“Fortunately it seems most banks are on track to meeting the new minimum capital requirements through the organic retention of net income,” read part of the report.
According to the report, the banking sector continued to improve its loan portfolio quality as reflected by a decline in the non-performing loans (NPLs) to total loans ratio from 1,75 percent as at December 31, 2019 to 0,31 percent as at December 31, 2020.
IH said the sector managed to take on additional risk, but sustain an improvement in the NPLs ratio, by enhancing credit risk management practices through their loan grading methodologies, recoveries and write-offs.