Digitalisation to propel NMBZ growth

30 Apr, 2021 - 00:04 0 Views
Digitalisation to propel NMBZ growth NMB digital centre in Harare.

eBusiness Weekly

Enacy Mapakame

The growing digitalisation being experienced across the country is expected to continue to be a huge driver for banking group NMBZ Holding’s earnings in the financial year 2021.

World over, the Covid-19 pandemic pushed for the quick adoption of digital platforms for services across sectors. Banks have not been left behind. 

Brokerage firm, IH Securities, sees this growing trend paying dividends for NMBZ with fees and commission expected to jump by 150 percent.

“It is our view that digital banking fees will continue to drive revenue as the banking experience moves from the brick-and-mortar business model and therefore forecast fee and commission income of $2,04 billion for FY21, up from $815, 54 million recorded in FY20, “ said IH. 

Last year, digitalisation played a key role in the banking group’s performance as the market quickly shifted towards online and mobile banking in line with the various levels of lockdowns that were implemented since March 30, 2020.

Chairman Benedict Chikwanha, said the banking firm had launched its digital strategy at the most opportune time and been instrumental in driving business within the Covid-19 circumstances.

The bank recorded significant growth, expansion and improvement in its digital platforms, resulting in enhanced service delivery in addition to value preservation strategies in view of the inflationary environment that prevailed.

“These measures culminated in the group’s remarkable financial performance in spite of the difficult operating environment,” said Chikwanha in a statement accompanying results for the prior financial year.

Total income is projected to grow to $3,51 billion for FY21, up from $2, 67 billion in the comparable period. 

IH Securities sees operating expenses moderate on assumption that inflation maintains its current downward trajectory. 

Said IH Securities: “We have therefore forecast opex of $1,05 billion for FY20, up from $814,19 million in FY19. Overall, for FY21 net income is expected to remain flat at $1,84 billion, marginally up from $1,81 billion posted as we do not explicitly expect a repeat of the tax credit in FY20.”

Deposits are expected to maintain an upward growth trajectory as a result of the bank’s aggressive deposit mobilisation efforts in pursuit of the broadening of its target market segments. For FY20, deposits closed at $3,49 billion from $1,19 billion recorded in the prior year.

The banking sector as a whole is anticipated to scale up operations as inflation slows post covid induced lockdown in the country due to increased activity. The country is also expecting a bumper harvest this season which will boost the manufacturing sector as well as increase disposable incomes. 

Additionally, the central Bank is seen maintaining a tight grip on liquidity reducing some of the downside risk of another run of inflation which was affecting viability in the regulated sector. On the other hand, the central bank has also announced that banks that access the Medium-Term Bank Accommodation facility (MBA) can only on-lend the proceeds from the MBA Facility at a maximum 10 percent above the borrowing rate to ensure recovery of the productive sector effectively putting an interest rate cap of 40 percent.

Said IH “The material concentration of NMBZ loans and advances is within the services and agricultural sector and depending on their exposure to the MBA facility, this might mean limited return for the bank. With stricter credit vetting measures, we do not foresee a drastic upswing in lending activity at the bank especially for retail clients with loans expected to grow 46 percent to $5, 47 billiom.”

Interest income is seen punching below its weight in the composition of revenue in the short term while net interest income for the period is anticipated to double to $839, 41 million, up from $410, 5 million reported in FY20. 

IH upgraded NMBZ to a hold recommendation with a target price of $9,85 cents on the Zimbabwe Stock Exchange.

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