FINANCIAL services group, ZB Holdings (ZB), has announced plans for a cautious asset creation initiative as part of a broader strategy that, among other things, is expected to curb earnings volatility going forward, a company official said.
In the group’s half-year results for the period ended June 30 2013, CEO Ronald Mutandagayi said cost optimisation remained an operating imperative, with the group having considered numerous options for cost containment to improve profitability from current levels.
In the period under review, ZB reported a US$2,6 million profit after tax, a figure representing a 168% growth from last year.
This was despite mounting pressure on operating costs which increased by 10% from US$27,4 million in 2012 to US$30 million in 2013, achieving a cost efficiency ratio of 83%, an improvement from the 91% achieved in the corresponding period.
Total income for the period went up 20% on prior year to US$36,2 million despite a reduction in net interest income of 6%.
The increase in total income was anchored on a 28% increase in premiums revenues and a 164% improved outturn on capital gains on trade investments.
Net interest income slid to US$10,6 million from US$11,6 million prior year after an increase in interest expenses to US$7,1 million, up from US$6,7 million in the first half of 2012. Mutandagayi said an increase in insurance expenses of 26% was consistent with the increase in the business volumes.
“However, an aggregated insurance technical result of US$4, 3 million was posted (2012: US$3,2 million). Additionally, an interim transfer to the life fund amounting to US$1,9 million was made (2012: (US$1,1 million)),” he said in a statement.
ZB said the net charge to the income statement for loan loss provisions amounted to US$0,6 million down from US$2,3 million prior period.
Total assets increased by 7% from December 31 2012 to close at US$348, 8 million as at June 30 2013, on the back of a 7% growth in total deposits which increased from US$216,7 million to US$232 million over the same period.
“Sadly, the deposits remained transient and unable to support the creation of significant long-term assets,” Mutandagayi said.
“In sympathy with the tight liquidity conditions, the loans-to-deposits ratio was maintained at a conservative 63%, the same level as at December 31 2012, whilst prudential liquidity ratios for banking operations were maintained above 30%, with the aggregate ratio as at June 30 2013 being 33%.”
The ZB MD said the group’s channel expansion programme continued, with the establishment of three branches at informal trading zones in Harare and one campus branch at Bulawayo Polytechnic College. A total of US$1 million was spent on branch renovations, with general ambience at the Graniteside and Victoria Falls branches having been matched to international standards.
He said risk underwriting capacity for the group’s reinsurance operations improved through capital support of US$2 million.
ZB chairman Bothwell Nyajeka said the reorganisation of the group’s capital resources through the amalgamation of its banking operations was underway.
“This will enhance the underwriting capacity within the group’s banking operations while eliminating unnecessary duplication which imposes onerous requirements on shareholders for the mobilisation of regulatory capital for each of the disparate banking units,” he said.
Following authority granted by shareholders in 2008 for the recapitalisation of the group through a private placement, active engagement with prospective investors was underway, Nyajeka said.
Shareholders would be consulted once a suitable opportunity had been identified.