eBusiness Weekly
Tawanda Musarurwa
Listed financial services group, ZB Financial Holdings has made a significant headway in reducing its non-performing loans (NPL) ratio to just 1,2 percent.
Said chief executive officer Ron Mutandagayi at an analysts briefing yesterday:
“Our NPLs have steadily declined . . . the movement having been as a result of concerted recovery efforts. In our previous briefing we indicated that our preference was to try and collect bad debts and not improve our ratio by just lending loans, which will end up again as non-performing loans, and this is just a testimony to
that.
“Resultantly our NPL ratio has now come down to 1,2 percent as at June 30, 2019. The reduction in NPLs has been across all sectors,” he said.
This was a significant improvement from an NPL ratio of 4,6 percent as at December 31, 2018. In 2014, the NPL ratio was as high as 29 percent.
The Group’s loan book grew by 120 percent from $152,2 million as at the end of last year to close at $334, 2 million in the period under review “as loan renewals by obligors came through at increased levels, while foreign denominated loans where translated at a higher rate at the end of the period,” said management.
ZBFH’s non performing book at $3,9 million was 44 percent lower than $7 million as at the end of 2018.
The financial services provider’s performance in the period under review was impressive as total income jumped 144 percent from US$38,6 million achieved for the half-year ended June 30, 2018 to $94,2 million for the six months up to June 30, 2019.
This is notwithstanding the fact that a significant contribution to other operating income was reported in the form of exchange income, having arisen from the movement in the exchange rate which increased by 216 percent from the maiden rate of US$1: ZW$2,5 in February to US$1: ZW$7,895 at the end of June 2019.
The group’s total unrealised exchange gain as at June 30, 2019 amounted to $29,4 million.
Net interest income from lending and trading activities of $14,3 million up to June 30, 2019 was 40 percent better than $10,2 million reported for the corresponding period in 2018.
“The increase was on the back of an expansion in the earning assets portfolio which grew by 57 percent over the six months from January to June 2019. This was also assisted by the re-pricing of loan assets in May 2019 following the removal of the regulatory rate ceiling which applied previously,” said management.
“The increase in the net interest income is despite a 90 percent increase in interest expenses which was influenced by increased recourse to the wholesale market particularly during the first quarter of the year in response to increased volatility in the liquidity position as economic agents responded to policy developments affecting the monetary environment.”
In line with the increase in the
loan book, a higher loan impairment charge, net of recoveries, at $3,9 million, was posted for the six months’ period under review, compared to a net recovery of $0,7 million in the corresponding period in 2018.
Net earnings from lending and trading activities thus decreased from $10,9 million for the period under review to $10,5 million, a 4 percent decline.
Banking commissions and fees at $27,5 million for the latest six months’ period registered an increase of 39 percent when compared to US$19,8 million registered in June 2018.
Operating expenses increased by 75 percent to $48,8 million for the half year, from level of $27,9 million recorded in the corresponding period in 2018.
“The increase has largely trailed the inflation index and indicates the build-up of pent up cost expansion pressure going forward,” attributed management.
ZBFH posted profit after tax of $43,4 million for the latest half year, which was 364 percent higher than the $9,4 million posted in the comparative half year in 2018.
Total assets grew from $663,2 million as at the end of 2018 to $1,1 billion as at June 30, 2019.
“Over and above the general inflation pull factor on monetary balances, total asset growth was also induced by the restatement of foreign denominated balances which were previously maintained at par with the Zimbabwean dollar.
“The process of translating foreign balances upon change in the functional and reporting currency resulted in a non-distributable reserve of $110,0 million being reported as part of the Group’s equity,” said the group.
Earning assets grew by 57 percent to close at $709,1 million as at June 30, 2019 compared to $453 million in the prior comparable period.
And total deposits grew by 23 percent from $433 million as at the end of last year, to close at $533,8 million in the six months’ period under review.
