NEDBANK Zimbabwe is one of the country’s top banks with an impressive cost of funds ratio of less than 1%, which reflects a high level of confidence in attracting deposits.
The bank rebranded from MBCA as it sought to align itself with its parent company, the Nedbank Group, which operates across the sub-Saharan Africa region.
Nedbank Group Investment Africa holds 67,48% shareholding in the local entity and Old Mutual Zimbabwe is the second largest shareholder with a 20,9% stake.
In terms of size, the bank is ranked among mid-tier financial institutions with an asset base of US$367,5 million.
The bank accounts for 3,4% of the industry’s deposits and just 2,48% of the US$3,4 billion of the total loans in issue as at December 2017.
Nedbank ranks 5th with an interest expense-to-interest income ratio of 6,4%.
This ratio shows the extent of the margin between the cost of deposits and funds issued as loans or government securities. It could be equated to gross profit in other entities.
The smaller the ratio, the more profitable the bank is expected to be, or rather the more efficient it is in managing its deposits and loans.
Stanbic tops the rankings with 0.8%, followed by StanChart (0.9%), Barclays (1,4%), and Steward rounds up the top 4 with a ratio of 1,8%.
Metbank and CBZ come right at the tail end with a ratio of 94,2%, and 55,4% respectively.
During the year under review Nedbank reported interest income of US$18 million.
Nedbank has a non-interest income-to-total net income ratio of 51%. 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.
This type of income can be incidental in nature and hence cannot be relied upon to continue flowing in.
National Building Society is first with 32%, followed by Agribank (38%), FBC (39%), BancABC (39%) and Ecobank (43%) complete the top 5 in this ranking.
The 6th to 10th spots are held by entities whose ratios marginally differ, Stanbic in 6th has a ratio of 50%, CABS (50,4%), Nedbank (50,7%) and NMB (53%), and StanChart (54%).
Banks whose total income saw a marginal increased contribution from non-interest income are: FBC (61%), ZB Building Society (66%), Barclays (70%), CBZ (72,5%), POSB (73%), ZB (77%), and the banks with the biggest non-interest income contribution to income are Steward (90%) and Metbank at 100%. This essentially means that Metbank relied solely on non-interest income to keep afloat.
The survey also revealed that Nedbank’s costs were excessive as the bank ranked poorly with a cost-to-income ratio of 69%. This ratio depicts the efficiency with which an entity manages its costs relative to earnings; the smaller the ratio, the more efficient it is.
Ecobank tops the list with a ratio of 42% and BancABC is last with a figure of 82%. Of the big banks, only Stanbic and CABS have better ratios of 60% and 63% respectively.
The bank has the second highest staff cost-to-total expenses ratio at 56,9%, an indication of the contribution that human resources costs make to total expenses.
A service-based business would tend to have a higher ratio compared to a manufacturing concern. Going forward, Nedbank is seen playing a leading role in the country’s economic development, given its unique position, to secure affordable lines of credit for on-lending to the private sector.
This year, the bank has availed a US$75 million line of credit facility through its mother company, Nedbank South Africa, under which pre-and post-shipment offshore finance will be offered to exporters. — Staff Writer.