BancABC, the local unit of African Banking Corporation, is among the top banks that are generating the bulk of their revenue from interest-bearing activities, a survey of financial institutions operating in the country conducted by the Zimbabwe Independent has revealed.
By Kuda Chideme
In the year ended December 2017, the bank generated interest income of US$35 million to give it a non-interest-income-to-total-net-income ratio of 39%.
The ratio signifies the extent to which a bank’s income is reliant on non-core activity earnings. For the purposes of ranking, the lower this ratio is, the better, even though an entity might be realising more income. Other banks’ ratios are relatively much higher.
This type of income can be incidental in nature and, hence cannot be relied upon to continue flowing in.
When the interest income is compared in relation to operating expenses, the bank is ranked 5th at 83%.
This ratio reflects the ability of the entity to meet the operating expenses from the interest earned. Any figure below 100% means that the bank has to either earn some non-interest income to bridge the gap or face the losses that would be incurred.
The bank is sitting on US$400 million worth of deposits, accounting for 4,6% of the industry’s US$8,6 billion.
In terms of loans, BancABC has 5,34% of the total US$3,4 billion represented issued loans as at 31 December 2017.
The bank reported more than US$50 million in deposit capture in Zimbabwe for the year ended December 31, 2017 on the back of a strong agency banking programme. The group said the agency banking programme continues to be a strong driver of customer growth and deposit capture.
In line with the growth in use of plastic money in Zimbabwe due to cash shortages, BancABC also upgraded its digital platforms during the financial year. The programme included the re-introduction of mobile banking, as well as adding instant interbank transfers. The survey also showed that BancABC, at US$20 million, ranks third in terms of total non-performing loans (NPLs).
These represent the loans that the borrower is not servicing; neither the interest nor the principal debt. They are not yet regarded as write-offs because of the possible fact that the collateral security could still be sufficient to recover the loan.
In the full year, the bank reported an after-tax profit of US$5 million.
BancABC has the second lowest return on assets (ROA) at 1,1 %. This is an indication of the return that an entity has made on the assets of the business. A positive ROA is the desired one and the higher the better. National Building Society (NBS) ranks last as it has a negative ROA of -1,2% and that is largely due to the fact that the financial institution is a new market entrant and still establishing the business.
In terms of return on equity (ROE), BancABC is also lowly ranked at 6,23%, performing only better than NBS which is the only entity that has a negative ROE of -3,56%. This is a profitability ratio that reflects the return earned on the equity invested in the business, and a high and positive rate represents a good return, whilst a negative one means the erosion of equity.
Out of the 18 banks, BancABC is among the institutions with the highest staff-cost-to-total-expenses ratio of 36,7 %.
The ratio basically indicates the contribution to total expenses that human resources costs make. A service-based business would tend to have a higher ratio compared to a manufacturing concern.
African Banking Corporation, the parent company of BancABC, was acquired by Atlas Mara, an investment group founded by former Barclays boss Bob Diamond.
It has operations in Botswana, Mozambique, Tanzania, Zambia and Zimbabwe and a group services office in South Africa.
BancABC has 23 branches in Zimbabwe.