ZIMBABWE’S second largest mortgage lender, Beverley Building Society, said it was working on doubling its mortgage book during the current financial
year, despite the harsh economic environment in the country.
Beverley’s managing director, Mike Moyo, told businessdigest that the building society, which has been subject to a take-over rumour, would increase its bias towards mortgage lending to ease the country’s housing backlog estimated at nearly one million units.
“We will focus more on our core business of mortgage lending. More applications were approved, increasing our mortgage balance during the financial year to June. If possible, we would want to double the figure,” said Moyo.
There have been concerns by the Reserve Bank that building societies had departed from their core business of mortgage finance to potential property owners or developers and embarked on non-core operations to survive the grueling economic crisis that has resulted in the closure of the 15 financial institutions since 2004.
Moyo said high property prices, interest rates and building costs had been major obstacles to both property purchase and development, resulting in constrained mortgage lending by building societies.
“A total of 797 applications worth $950 million were approved (during the financial year to June 2006). $590 million was advanced towards residential housing, while $360 was channeled to the commercial and industrial sector,” Moyo said.
Beverley’s mortgage book during the period showed the building society’s inclination towards financing of low to medium density houses.
“Our mortgage balance increased from $668 million to $750 million during the financial year end,” said Moyo.
While most companies are mourning about the difficult trading conditions, Beverley’s operating conditions returned to near normality during the year ended June.
“During the year to June, Beverley posted a net surplus of $1,068 billion, a 1 487% increase from the same period last year,” said the building society in a statement accompanying its financial results.
The building society said the growth was achieved through increased asset volumes which compensate for declining margins and growth in non-funded income.
During the period under review, Beverley undertook a voluntary redundancy scheme which resulted in a once off payment of $179 million to 79 employees in June 2006. Deposits from the public grew by 759%, although the society said the growth was mainly inflation driven.
Cost to income ratio improved from 65% in 2005 to 47%.
Beverley had the highest return on shareholders’ funds of 42% against a market average of 28%.
The period under review saw the building societies information technology (IT) project being adversely affected by the shortage of foreign currency and a devaluation of the local currency to $250 against the greenback on July 31.
Against this background the society was exposed to substantial foreign exchange losses on outstanding invoices.
“The devaluation will result in a further charge to the income statement in the current year of some $135 million,” said Beverley.
The building society said an IT review by external auditors during the period revealed a weakness.
Moyo said the situation is however being attended to.