ZB Financial Holdings recently announced what management described as “disappointing” results for the year 2013 with profit dipping to US$0,9 million from US$10,9 million.
The profit decline was due to a reduction in income which chairman Bothwell Nyajeka partly attributed to management’s deliberate decision not to increase the lending book in order to curb the increase in the loan-to-deposit ratio which was restricted to 61 percent.
“This is on the back of a marked reduction in total net revenue which reduced from US$69 million to US$63,2 million,” Nyajeka said.
“A 19 percent reduction in commissions and fees and a 55 percent reduction in fair value credits are the major contributors to the negative outturn.
“Out of the US$0,9 million group profit, only US$0,3 million is attributable to the owners of the holding company.”
The Memorandum of Understanding concluded between the Reserve Bank of Zimbabwe (RBZ) and the Bankers Association of Zimbabwe had a significant impact on group revenues derived from banking commissions and charges.
“The (company) has embarked on a group-wide cost cutting exercise, benefits of which will be more visible in the future,” he said.
Consequently, the misalignment of term structures between funders and borrowers continued to put a strain on the financial intermediation processes with the result that credit risk continued to increase as operating fundamentals for companies deteriorated.
“Interest margins remained very tight whilst growth in income earning assets was constrained,” he added.
On the back of a one percent increase in total deposits from US$216,7 million in 2012 to US$218,6 million in 2013, the group could only afford an increase of one percent in its total assets which closed the year at US$332 million.
“The advances book receded by two percent from US$136,2 million to US$133,8 million as the group focused more on recovery efforts whilst growth was deliberately restricted with greater emphasis being placed on high quality assets with credible security,” said Nyajeka.
As in 2012, the group continued to keep a significant portion of its assets in non-interest earning classes in order to provide liquidity cover.
Liquidity ratios were maintained at above 35 percent for all regulated entities throughout the year whilst cash alone, at US$69,2 million, constituted 21 percent of the total assets for the group at the close of the year.Advertisement
In the outlook period, ZB Financial Holdings said full implementation of the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET) is expected to provide some growth impetus to the economy.
Gains are particularly expected in agriculture, mining and quarrying, Information and communication technology (ICT), construction, small and medium enterprises (SMEs) and real estate sectors.
“However, this should be premised on the availability of funding mechanisms, which should help to improve the liquidity conditions in the economy.
“The full assumption of the role of lender of last resort by the Reserve Bank of Zimbabwe will also assist in stabilizing and strengthening the financial sector,” said Nyajeka.