REGIONAL banking group African Banking Corporation (ABC) is planning to streamline its Zimbabwean operations in an effort to cut down on increasing operational costs.
>The company’s costs for the year ending December 2004 saw an increase of more than 100% to close the year at $56,6 billion compared to last year’s figure of $22,5 billion.
Company insiders said the holding company, ABC Holdings, had raised concerns over the continued increase in local operational costs and there are suggestions that the company should reduce its current staff.
Douglas Munatsi, ABC Holdings group chief executive officer, confirmed the company’s position on the need to reduce local operations expenditure.
“We are looking at achieving major cost savings especially in Zimbabwe and this means we would have to act on issues to do with staff and others which we believe would reduce the figures,” said Munatsi.
He said the continued rising costs, coupled with the difficult Zimbabwean operating environment, was likely to impact on the company’s profit margins in the coming year.
“Zimbabwe has always produced good results for the group, but factors such as rising costs in doing business is likely to impact on its margins in the coming year,” said Munatsi.
Munatsi said operational challenges such as the lack of foreign currency required a long-term solution, as this impacted on other sectors of the economy.
He said although interest rates had retreated from the high of 600% in 2004 to the current 132%, the sector still considered the figure too high.
“Although interest rates reduced significantly they stabilised at levels which we still considered high,” said Munatsi.
He said the collapse of banks locally due to liquidity challenges also impacted on its regional operations.
“The collapse of banks in 2004 impacted on our regional operations as the bank was being labelled a Zimbabwean bank which in turn impacted on customers’ confidence in dealing with us,” said Munatsi.
Munatsi said the growth in macro-finance operations in Zambia was encouraging, a position which has led to the group sourcing other markets.
“We have registered significant growth in Zambia and this has provided an opportunity for the group in that sector which will be followed through by sourcing markets for that type of business,” said Munatsi.
ABC Zimbabwe merchant bank registered a historical profit after tax of $30,5 billion compared to $14 billion in 2003.
The bank also saw its balance sheet grow by 151%, a position Munatsi attributed to an increase in customer deposits with the bank.
“We had to monitor the bank’s lending during the year under review mainly because of the high interest rate as the bank had viewed the risk of default as high because of the condition,” he said
He said the bank’s capital adequacy ratio has remained satisfactory at 16% against the Reserve Bank’s minimum prescribed ratio of 10%.
ABC Holdings is a regional finance group with interests in treasury, investment banking, trade finance, leasing and corporate banking and is currently trading at $800 a share on the Zimbabwe Stock Exchange.