admin
Business Editor
ZB Financial Holdings should have issued a profit warning after it reported significantly lower earnings in the year to December. An 8 percent decrease in total income, which in turn was not matched by a decline in operating expenses saw its bottomline fall 92 percent in the year to December 2013.
Finance director Mr Fanuel Kapanje told analysts at the group’s maiden briefing on Monday that total income was down 8 percent to $64,95 million from $70,7 million due to a cocktail of factors, which included a 16 percent decrease in non-funded income on the back of subdued fees and commissions and lower fair value credits of $2,5 million compared to $5,7 million in 2012.
Like all the other banks, there was a reduction in fees due to the Memorandum of Understanding entered between the Reserve Bank of Zimbabwe and the banking institutions.
Net interest income was up 2 percent to $21,63 million.
Mr Kapenje admitted that performance was not impressive.
Chief executive Mr Ron Mutandagayi summed it all up saying liquidity remained generally illusive throughout the year with no viable credit expansion initiatives in sight.
The group could not source any international lines of credit because it is still under US sanctions. Net insurance earnings increased 49 percent to $8,03 million after an improvement in business and underwriting capacity.
However, operating expenses remained flat at $59 million but put a strain on the declining income leading to a cost efficiency ratio of 91 percent from 85 percent in 2012.
The pre-tax line was at $1,06 million, while there was a substantial decreasing in earnings with the bottom line closing at $868 105, a 92 percent decrease on 2012 and earnings fell 96,08 percent to 0,02c from 0,05c.
“As a result the net profit margin fell to 1,34 percent from 15,36 percent in 2012 but is still marginally higher than the negative 3,73 percent the group experienced at the start of dollarisation, and the minus 4,92 percent reported in 2010.”
The group transferred $4,06 million to life assurance funds, which widened the drop in profitability.
In terms of contributions by units, banking led on total income at $52 million, followed by insurance at $12 million but investment banking was still a challenge due to the low levels of investment on the stock market.
The group has one of the widest branch networks in the country at 68; has eight insurance offices, 68 ATMs, plus 500 point of sale machines and a staff complement of 1 628.
Mr Mutandagayi said the group had, however, maintained a steady and sustainable growth in market share averaging 5,3 percent in 2013.
On the back of a 1 percent increase in total deposits to $218,6 million, the group could only afford a 1 percent increase in total assets at $332 million.
The advances book declined 2 percent to $133,8 million as the group focused more on recovery efforts.
“Growth was deliberately restricted with greater emphasis being placed on high quality assets and credible security.
“The loans to deposits ratio was reduced marginally at 61 percent from 63 percent, which is a prudent level in view of the pervasive increase in credit risk.”
There were no major changes to the loan portfolio mix since 2012 with individuals at 24 percent.
“However, most exposures to individuals are covered by insurance.”
Non-performing loans at $28,9 million constituted 17,3 percent of the aggregate loan book with a total of 37 percent set aside as specific provisions and interest reserves.
“The balance is adequately covered by the security at hand.”
Of the advances, 33 percent are loans, 28 percent are overdrafts, 4 percent is in lease hire 7 percent in mortgages and trade bills 25 percent.
In terms of the other ratios, Mr Kapenje said the liquidity ratio was at 39 percent versus the required 30 percent.
The aggregate capital is largely illiquid and inflexible as it is mostly legacy from the Zim dollar era.
The capital ratio of 20 percent, said Mr Kapenje, is still at a comfortable point for the level of risk underwritten.
Online Reporter