The bank, a member of South Africa’s Nedbank Group, shrugged off the liquidity challenges bedevilling the banking sector to deliver total operating income of US$19,085 million, a figure which was up by US$4,6 million on the prior year’s income of US$14,460 million.
The bank’s total operating expenses came in at US$15,168 million for 2011, 25% up from US$12,119 million in 2010, largely owing to a 32% growth in employee costs, which rose from US$6,517 million to US$8,651 million.
MBCA’s cost to income ratio trended downwards from 84% in 2010 to 79% in 2011. However, the ratio is still in red territory and the bank needs to sustain the positive trend through additional measures to manage costs and grow revenues.
Non-funded income for 2011 comprised US$6,788 million in fees and commissions and US$4,145 million in dealing and trading income. The latter is an indication that the bank is engaged in active dealing on the international foreign currency markets for its own account and reflects on its strong offshore links and access to healthy lines of credit and counterparty limits.
Contacted for comment, MBCA CEO Charity Jinya said it is the bank’s strategy to grow both funded and non-funded income to reduce reliance on funded income, which exposes the bank’s balance sheet through lending.
“In fact, as a bank we use the non-funded income to operating expenses ratio as a performance measure and a ratio above 100% is a good target for the bank,” she added.
The bank’s loans to deposit ratio declined from 61% to 54%, reflecting the dilutive effect of the growth in deposits, which was not matched by growth in lending which was largely flat.
The bank said dealing income is driven by volatility in the global foreign currency markets and the activity of local importers and exporters.
“The bank is also strong in trade finance and hence it will continue to generate income from Zimbabwean companies which import and export goods and services,” Jinya said.
The bank’s conservative approach to lending saw its net loan book remain stable at US$82,268 million, from US$81,150 million in 2010, resulting in its net interest income growing marginally from US$10,132 million in the prior year to US$10,773 in the current reporting period.
Reflecting the bank’s strong focus on prudent asset liability management strategies, the US$15 million growth in the bank’s deposits was channeled mostly into cash and equivalent assets. Jinya highlighted that a strong Asset Liability Management Committee (ALCO) process was in place to ensure prudent cashflow management by monitoring maturities and taking timely corrective action. Thus the bank’s liquidity gap is strong and healthy.
Market risk is low as reflected by the bank’s narrowing cumulative interest rate gap.
MBCA’s total assets grew by US$20 million from US$160 million in 2010 to US$180 million in 2011, while the bank’s liquidity as reflected by its cash and cash equivalents grew by US$20million from, US$56,0 million to US$76,3 million.
The bank’s concentration risk on its loan portfolio seems deliberate and under control. It argues that the concentration is following the economic sectors that are currently driving Zimbabwe’s economic growth, which are agriculture and mining.
As the other economic sectors begin to grow, the bank will show increased exposures to these sectors, she said.