ZB realigns focus towards real assets, revenue up 294% in first 9 months

ZBBank slides
ZBBank slides

HARARE – (FinX) – ZB Financial Holdings says it will continue to focus on capital preservation and manage cost expansion against revenue growth in order to secure the sustainability of operations. This comes as the trading environment in the third quarter, as in the preceding quarters remained challenging.

Persisting forex shortages and local bank notes; a rapidly depreciating local currency against major currencies, in particular the US Dollar; shortages of fuel and energy and declining household disposable income levels and spiral inflation have been cited as the major problems affecting the banking industry to operate at full capacity.

The cost of doing business continues to increase while the value of the group’s capital has been eroded.

As expected, due to inflationary pressures in the market, operating expenses rose 109% to ZW$86.9 million in the nine months ended 30 September 2019 from ZW$41.7 million in the same period last year.

This cost out-turn is below inflation principally because the increases in salaries and wages have lagged behind year on year inflation, last reported as 175.66% as at 30 June 2019

“Against this background, the group has realigned its strategic focus from growth to preservation of its capital base through the acquisition of real assets,” the group said in a trading update on Monday.

However, the financial numbers are derived from historical cost accounting basis only.

Total revenue grew by 294% to ZW$234.1m from ZW$59.4m recorded in the comparable period last year due to a significant contribution from fair value credits and exchange gains from the revaluation of its foreign exchange position. Of the topline, non-funded income contributed 86%, while net interest income contributed 14%.

“The low net interest income contribution to total income was a result of constrained lending activities,” ZB stated.

Profit after provisional taxation of ZW$125.3 million was realised in the nine months ended 30 September 2019 which represents an 806% increase from ZW$13.8 million reported in the comparative period last year.

ZB’s balance sheet grew by 128% to ZW$1.51 billion during the period under review, representing a 128% increase from the closing balance for the prior year of ZW$663.2 million as at 31 December 2018. Total earning assets stood at ZW$829.5 million, having increased by 83% over the same period.

According to the trading update, all business units complied with minimum capital provisions applicable to their industries except for ZB Building Society whose capital of ZW$19.3 million was lower than the regulatory minimum capital requirement of ZW$20 million. The corrective order issued on 7 March 2017, renewed on 13 April 2018, following a targeted corporate governance inspection by the Reserve Bank of Zimbabwe (RBZ) in terms of Section 48(4) of the Banking Act [Chapter 24:20] is still to be lifted.

“Satisfactory progress has been made in addressing the issues raised therein.”

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