By Admire Mavolwane
CBZ Holdings is the new entity that started operating in 2005 after the restructuring of the operational structure of the Commercial Bank of Zim
babwe (CBZ) necessitated by the acquisition of Datvest Asset Management from Interfin Holdings.
The asset management company was acquired during the first half of the year. Thus, CBZ Holdings is the holding company for the commercial bank, CBZ Bank Ltd, a registered commercial bank whose services encompass merchant and commercial banking and the provision of financial services in the form of hire purchase, leasing, business loans and other related forms of finance. It is also the holding company for Datvest Asset Management which is one of the biggest “independent” asset management firms in the country.
Major shareholders of CBZ Holdings are Absa Group Holdings of South Africa with 25,78%, followed by the Government of Zimbabwe with 17,19% and Libyan Arab Foreign Bank with 15,04%. The Libyan Arab Foreign Bank became a shareholder of the bank, probably in part payment for fuel which that country has availed to Zimbabwe a few years ago.
However, with government remaining a fairly significant shareholder in the bank, CBZ is perceived as possibly sitting on some injudicious exposures due to this association, an assertion that the bank’s management (repeatedly) insist is erroneous.
The group has also been criticised by some sections of the analyst community for its refusal to give straight answers and levels of disclosure regarding the price it paid for Datvest Asset Management and the issue of its exposure to TeleAccess.
Following the sudden change in the fortunes of banks after the structural dislocation in the sector following the high profile collapse of a number of indigenous banks in 2004, 2005 was the year of consolidation.
It was the year in which CBZ was expected to shift its model more towards the Barclays and Standard Chartered vanilla banking type.
In 2004, the group experienced a 465% growth in relatively cheaper retail deposits to $708,7 billion, benefiting from the flight to quality. This growth continued in 2005 with a 910% increase in customer deposits to $7,2 trillion. Buoyed by this growth, net interest income grew by 340% to $2,7 trillion.
However, the impact of the high interest expenses incurred in the first half — 27,7% vs. 47,1% in June 2004 for net interest margin had the impact of reducing the net interest margin from 45% to 36% and hence the lukewarm growth in net interest income.
Non-funded income, which comprises fee and commissions, foreign currency trading revenues, marking to market gains/losses grew by a factor of 4,5 times to $717 billion obviously benefiting from the consolidation of Datvest. Consequently total operating income grew by 341% to $3,4 trillion.
With revenue’s growth outpacing the 247% increase in operating expenses to $690 billion, by almost hundred percentage points, the cost to income ratio improved from 28% to 21%, which was by far the lowest in the industry.
Provisions grew by 201% to $205 billion (H1: $110 billion), bringing the total provisions to $320 billion, of which $133 billion were deemed specific, $118 billion general and $69 billion was suspended interest.
However, these provisions at 5% of total advances were towards the lower end with the sector. In fact, it was less than the banking sector average of 8% of total book and given that most of the advances were to agriculture (35,8%), $1,5 trillion out of $4,2 trillion, the provision seems a bit too conservative.
After accounting for outflows in the form of taxation, attributable earnings of $1,6 trillion were achieved. This reflects a year-on-year growth of 420%. This was the highest growth rate recorded in the sector -— on an earnings growth basis CBZ comfortably grabs the crown.
The commercial bank contributed $1,4 trillion whilst Datvest weighed in with $136 billion. The balance sheet grew from $2,6 trillion to $14,1 trillion, making CBZ the second biggest bank in the country after Standard Chartered and firmly overtaking Barclays. The holding of money market assets increased 576% to $4,3 trillion as the bank became more active in the TB market.
Most of the deposits alluded to earlier were channelled into TBs which grew by 6,7 to $4,2 trillion. Growth in advances was aggressive — given the economic environment — up 255% to $4,2 trillion, of which $1,2 trillion was in the form of the higher yielding and more riskier overdrafts and $1,3 trillion in RBZ-funded advances, mainly ASPEF Funds.
In total, interest-earning assets grew by 439% to $12,5 trillion. Interest bearing liabilities, mainly in the form of customer deposits, grew by 498% to $8,7 trillion, while foreign currency deposits showed the highest growth rate of 1 000%.