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ZB to exploit its land bank, unlock value

ZB FINANCIAL Holdings (ZBH) has announced plans to develop superstructures on its 260 stands across the country, joining the craze of property development currently gripping financial institutions.

Taurai Mangudhla

ZBH group CEO Ronald Mutandagayi told businessdigest on the sidelines of the company’s analysts and media briefing held in the capital this week for the full year to December 2013 that through its building society, ZB Building Society, the group has earmarked land for the development of 10 cluster homes in Harare’s Hatfield suburb, 150 stands in the border town of Beitbridge and 100 stands in Springvale located on the outskirts of Harare along Mutare road in Ruwa.

In his formal presentation, Mutandagayi indicated the group wants to aggressively exploit its land bank and unlock value in the current year.

“We will have mortgages on the land and we believe other than selling land, we will create superstructures and sell,” he said.

Mutandagayi said going forward, the group was looking at reducing costs while realigning its business model to ensure the group benefits from its diversified structure.

In the period under review, ZBH said tight liquidity environment which has seen an 8% drop in group income to US$65 million from US$70,7 million prior year.

The income dip resulted in a 92% fall in after tax profits to US$861 105 from US$10,9 million in 2013 after operating expenses only went down by 1% to US$59,2 million in the period under review.
ZBH chairman Bothwell Nyajeka said the group’s poor performance was a result of a reduction in income which was not met by a commensurate decrease in costs.
“The decline in income was partly due to management’s deliberate decision not to increase the lending book. This was done to curb the increase in the loans to deposit ratio which was restricted to 61%,” Nyajeka said in a statement attached to the group’s financial results.

Non-performing loans in the group’s banking division — ZB Bank-stood-at US$28,9 million, constituting 17,3% of the loan book with a total of 37% of the non-performing book having been set aside as specific provisions and interest reserves. The balance is considered to be adequately covered by the security at hand.

Mutandagayi said NPLs are spread across economic sectors, but manufacturing accounted for a significant portion of the NPLs with a number of big players in the struggling sector going under judiciary management due to lack of working capital and competition from cheap imports.

He said liquidity remained generally elusive throughout the year with no viable credit expansion initiatives insight.

“Consequently, the misalignment of term structures between funders and borrowers continued to put a strain on the financial intermediation processes with the result that credit risk continued to increase as operating fundamentals for companies deteriorated,” Mutandagayi said.

He also said agriculture and mining accounted for part of the NPLs.

“A lot of individuals are over borrowed because of the absence of a credit bureau and they are really struggling,” he said.

“The NPLs are partly secured and we are looking at the legal route to try and squeeze something out of some the players. There might be need for restructuring.”

Mutandagayi said in addition to the general slowdown in business, banking operations in the group were adversely affected by the restriction on amounts chargeable as banking fees and interest on lending products in terms of the Memorandum of Understanding concluded between banks and the Reserve Bank of Zimbabwe in February 2013.

Total deposits increased by 1% from US$216,7 million in 2012 to US$218,6 million in 2013, resulting in a 1% growth on assets which closed the year at US$332 million.

Loan advances receded by 2% from US$136,2 million to US$133,8 million as the group focused more on recovery efforts whilst growth was deliberately restricted with emphasis being placed on high quality assets with credible security.

ZB Bank posted a profit of US$800,000 in 2013, dropping from US$5,6 million in 2012.

Net interest income and commissions reduced by 4% and 10% respectively, constrained by limited portfolio growth and restricted rates and fees.

Deposits dropped by 2% to close at US$199, 3 million, restricting overall growth in total assets to only 1%.

ZB Building Society posted a profit of US$2 million in 2013, a reduction of 10% from the US$2,2 million posted in 2012. Total income reduced from US$7,9 million to US$7,7 million.

The group’s mortgage business experienced a reduction in deposits of 11%, while loans and advances increased by 25% on the back of investment supported mortgage facilities.

ZB Life Assurance saw a 9% growth in premium income to close at US$7,4 million in 2013. The company posted a profit of US$400 000 against a loss of US$400 000 in 2012 after a transfer to the life fund amounting to US$4, 1 million (2012 – transfer from the life fund of US$1, 7 million).

ZB Reinsurance’s gross premium increased by 28% from US$16,1 million in 2012 to close at US$20,6 million in 2013. The company posted a profit of US$1,2 million up from US$0,8 million in 2012.

ZB Asset Management Company was affected by low volumes of trade on the Zimbabwe Stock Exchange and the general lack of liquidity on the market with funds under management dropping 17% to US$56,2 million and resulting in a US$30, 000 loss.

On the other hand, ZB Securities posted a loss of US$300 000, worsening from a loss of US$200 000 in 2012.

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