Stanbic: Good Lessons in bad Times

ALLAN Gray Ltd, a financial service provider said investing can be a bit like an under-7s soccer match. In the beginning everyone stands in their positions, neat and tidy rearing to go.


The whistle blows, someone kicks the ball and players from both teams immediately desert their positions and race after the ball. The first player to get the ball kicks it as hard as he can in roughly the right direction.
Every player, including the nearest goalkeeper, runs towards the ball. If someone scores it is sheer luck because there is no game plan.
This has not been the case with Stanbic.
Since the economy was formally dollarised in January the bank “has not chased the ball randomly around the financial field”. Stanbic had a game plan which it has stuck to and when opportunities arose it was in the right position ready to score.
In a recovering economic environment, “a game plan” is what made the difference for Stanbic Bank, among other financial institutions. Stanbic said it studied the market whilst in the right position and waited for the right time to move. This resulted in the bank releasing some of the best financial results by a bank during the interim period ending June 30.
The bank’s financial investment at US$59 513 241 during the period under review, up from US$18 252 520 in January has inspired confidence to foreign and local investors and clients who have been sceptical about the country’s banking sector.
Insiders said the bank’s deposits have increased significantly since the information filtered through the market that the bank had released a pleasing set of results.
This was despite the fact that the money market remained passive during the period under review with little or no interbank trading as liquidity remained tight, with deposits flowing into banks extremely transactional, which curtailed credit creation.
As a result, banks resorted to structured lending and financing arrangements with rates being pegged to the London Inter-Bank Offer Rate (Libor) plus margins ranging from one to 6%, on mainly corporate loans. Libor is the interest rate that banks charge each` other for loans.
During the interim period, the bank complied with all directives from the Reserve Bank in all material respects and minimum capital requirements.
The bank achieved a profit after tax of US$347 595. This was mainly attributed to the growth in non-interest revenue that contributed 92% of total income.
“This was achieved on the back of improved levels of business activity as customers regained confidence in the banking system,” said Stanbic Bank chairman Sternford Moyo. “Contribution from net interest income was quite low as a result of depressed confidence in the banking system.”
 Moyo said the first half of the year saw marginal signs of economic recovery. The operating environment stabilised with the liberalisation of markets, the introduction of the currency system and the end of hyperinflation.
“Contribution from net interest income was quite low as a result of depressed interest margins in both the local and international markets. Operating costs were 83% of total income and the bank has implemented various cost-cutting strategies in order to manage operating costs,” Moyo said.
The bank had a statutory reverse balance of US$7 064 119 with the Reserve Bank. The funds in the statutory reserve account are not available to finance the banks’ day-to-day operations and no interest is earned on them except to the extent that they are used to finance concessionary lending facilities expressly permitted by the Ministry of Finance.
Loans and advances amounted to US$29 782 853 during the period
under review from US$19 169 772 on January 1.
The bank said it had adequate capital reserves to meet the regulatory minimum capital requirements of US$12,5 million required for commercial banks by the Reserve Bank.
As of Wednesday this week, the bank had 3,7 million unissued ordinary shares of one Zimbabwe dollar each (revalued currency as at August 2006). The unissued shares are under the control of the banks 11 directors. The bank is in the process of issuing bonus shares in US dollars from the company reserves.

 

Paul Nyakazeya

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