BY FIDELITY MHLANGA
LISTED financial services firm ZB Holdings posted a profit of $1,13 billion for the half year ended June 30, 2020 compared to $237,8 million in the comparative period in 2019 buoyed by growth in income.
The group posted a real total income growth of 138% from $838,2m for the six months to June 30, 2019, to $1,99 billion for the six months to June 30, 2020.
“This was on the back of gratuitous fair value credits and foreign exchange gains which, combined, contributed 79% of the total income, having increased by 574% from $232,9 million for the six months to June 2019 to $1,57 billion for the six months to June 2020,” said group chief executive Ron Mutandagayi.
Gross interest income retreated in real terms by 21% from $255,2m for the half year ended June 20, 2019 to $202,7m for the same period in 2020 following a 16% reduction in the real value of interest earning assets.
“Interest expenses reduced by 62% in real terms to $25,6 million for the half year ended June 30, 2020 compared to $66,9 million in the comparative period in 2019. This cost reduction was achieved on the back of changed deposit mix towards cheaper sources of funding with the whole funding book exhibiting price stickiness in the wake of a liquidity glut that predominated the market throughout the period,” Mtandagayi said.
A 174% increase in loan impairment charges from $28,9 million during the first six months in 2019 compared to $79,4 million for the first six months of 2020 is reflective of the increased level of assets exposed to credit risk which grew from $530 million as at June 30, 2019 to $2 522,7 million as at June 30, 2020.
Net income from lending and trading activities thus went down from $159,2 million for the half year ended June 30, 2019 to $97,7 million for the half year ended June 30, 2020.
Spurred by the increased renewal of covers in foreign currency and the continual re-evaluation of the gross values of insured assets, gross premium income increased by 12% from $254 million posted during the first half of 2019 to $286,6 million during the same period in 2020. Insurance expenses comprising commissions, reassurance and retrocession premiums, benefits and claims, similarly increased by 40% from $165,3 million during the first half of 2019 to $230,7m in the same period in 2020.
Mtandagayi said on aggregate, the insurance expenses ratio of 80% for six months to June 2020 compared to 65% in the comparative period in 2019 remained within an acceptable range with net insurance income declining from $88,7million for the half year to June 30, 2019 compared to $55,9 million for the same period in 2020.
Banking commissions and fees retreated 23% in real terms from $334,1 million for the six months ended June 30, 2019 to $258,1 million for the same period in 2020 despite an 11% increase in the number of customers on the book over the comparative periods and fee rate adjustments implemented between July 2019 and February 2020.
“Rate escalations were frozen from March 2020 as part of the measures implemented by the Reserve Bank of Zimbabwe to alleviate financial strain on the banking public at the peak of an economic lock-down to reduce the rate of spread of COVID-19,” Mtandagayi said.
The group’s operating expenses reduced by 6% from $593,9 million for the half year ended June 30, 2019 to $556,8 million for the same period in 2020. Non-cash depreciation and amortisation expenses constituted 5% of total operating expenses, underlining the growing impact of asset revaluations on the income statement.
The cost to income ratio improved from 71% to 28% between the comparative periods in 2019 and 2020 respectively. When assessed in relation to maintainable income, the cost efficiency ratio shows deterioration from 98% to 130% over the two periods, representing emerging performance strain that has become a key area of management focus.
The group’s total assets grew from $9,25 billion as at December 31, 2019 to $9,87 billion as at June 30, 2020 with a substantial part of the increase arising from the revaluation of properties in portfolio and equity investments and foreign denominated cash and bank balances.
Gross loans tracked inflation, reducing only marginally by 3% from $1,35 billion as at December 31, 2019 to $1,31 billion as at June 30, 2020. The quality of the loan book remained strong with the ratio of nonperforming loans to gross loans having improved over the period from 0,45% to 0,19%.
Total deposits receded in real terms from $3,59 billion as at December 31, 2019 to $2,85 billion as at June 30, 2020. Rate of deposit growth was tactically managed to match with the pace of asset growth without compromising the structure and quality of the balance sheet.
Despite general excess liquidity on the market, policy swings as may be necessary to curtail inflation have the potential of causing deep liquidity shocks on the balance sheet the company said to ameliorate this risk, the group maintained an aggregate liquidity ratio above 80% throughout the period.
The group’s total equity increased by 34% from $3,94 billion as at December 31, 2019 to close the period at $5,29 billion at June 30, 2020 with the average return on equity for the half year ended June 30, 2020 amounted to 49%, compared to 23% for the corresponding period in 2019.
“In line with the digital transformation strategy, the group formally launched its contact centre in August 2020. The group also expanded its product offering by launching the ‘Kesto’ diaspora banking unit, whilst issuance of Visa debit cards has commenced. Both products are expected to augment the group’s foreign currency earnings,” Mtandagayi said.
The group said it has intensified efforts to establish a regional presence with the registration of a reinsurance operation in Botswana having progressed and is now awaiting finalisation of regulatory processes
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