NATIONAL Building Society (NBS) has the lowest non-interest income to total income ratio out of all the banks operating in the country, an indication that the majority of the financial institution’s income is generated from lending activities, a survey by the Zimbabwe Independent has shown.
The bank reported total income of US$7 million, with income from lending activities coming in at US$4,8 million.
The bank is ranked in first place with a non-interest income to total income ratio of 32%. For 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.
NBS is closely followed by Agribank (38%), FBC Building Society (39%), BancABC (39%) and Ecobank (43%) who complete the top five in this ranking.
Stanbic was sixth with a ratio of 50%, followed by CABS (50,4%), Nedbank (50,7%), NMB (53%), and StanChart at (54%).
Banks whose total income saw a marginal increase 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 close to 100%.
NBS incurred a deficit of US$1,2 million, an improvement of 61% from the 2016 deficit of US$3 million.
The loss-making position has been attributed to the building society’s age and costs associated with the setting up and expansion of the business.
NBS assets grew by 140% from US$57,1 million to US$137 million. The growth in assets was driven by growth in customer deposits and borrowings.
Customer deposits grew by 185% from US$19,4 million to US$55,2 million over the year under review whilst borrowings recorded 117% growth from US$15,5 million to US$33,7 million as the mortgage lender underwrote more housing projects in line with its core mandate.
Resultantly, loans and advances disbursed grew by 155% from US$25 million to US$62,8 million.
NBS, wholly-owned by state-run pension fund, the National Social Security Authority, was launched in 2016 with the aim of reducing the country’s housing backlog.
Operating costs amounted to US$8,2 million.
The survey also revealed that NBS has the highest staff costs-to-income ratio of 55%, largely due to the fact that it is a relatively new entity that could be regarded as still finding its feet compared to its competitors.
This ratio reflects the human resources cost incurred in generating the earnings of the bank. As a cost item, the lower the rate the better it is for the entity. It also depicts the efficiency with which an entity manages its biggest cost centre seeing as banks are in the financial services industry, which relies significantly on human intervention apart from information technology.
For this ratio to be well articulated, the head count is ideal to ascertain the cost per employee contribution versus the revenue per employee, as the efficiency is better articulated then.
Staff costs accounted for 47% of the financial entity’s expenses during the year under review.
According to the survey, NBS is the only entity that has a negative return on investment at -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.
Unsurprisingly, the bank also has a negative return-on-assets (ROA) ratio of -1,2% which is largely due to the fact that the financial institution is a new market entrant and still establishing the business. This is an indication of the return that an entity has made on the assets of the business. A positive ROA is desirable, meaning the higher the better.
NBS has housing projects in Harare’s Dzivaresekwa, Stoneridge, Adelaide Park and Glaudina; Mutare’s New Mara, Bindura’s Woobrooke, Shurugwi’s Magakooshla, and Masvingo’s Victoria Ranch.
During the year under review, the entity delivered 307 completed housing units in various locations.
In addition, the building society had 840 units at various stages of completion which are expected to be delivered in 2018.
As at December 2017, NBS had signed offtake agreements which should culminate in the delivery of an additional 1 000 units in 2018. — Staff Writer.