NMB Bank Limited recorded 112% after-tax profit growth to US$21,3 million for the year-ended December 31 2018, up from US$10 million recorded the previous year. This comes as banks are grappling to survive in a volatile economic environment. Zimbabwe Independent business reporter Cloudine Matola (CM) this week spoke to NMB Bank Limited chief executive Benefit Washaya (BW, pictured) to find out how the financial institution is navigating the rugged economic terrain. Below are the excerpts of the interview:
CM: You are one of the banks that have been performing well over the years. What do you attribute your performance to?
BW: It’s a lot, let me say we have got a good business model, we manage our cost well, we look after our customers, our services are generally very good and customers want to go to an institution where they can get decent service.
We also have been increasing our customer numbers so these are some of the reasons why we have been performing and I think the other reason is we are one of the banks that acknowledge that our asset quality need to be improved. We started quite early in terms of managing our asset quality and that has helped us a lot.
CM: In 2015, you surrendered US$1 million worth of non-performing loans (NPLs) to the Zimbabwe Asset Management Company (Zamco) and were planning to offload more. What has been the situation since then?
BW: We no longer have an appetite for offloading NPLs. We are dealing with NPLs on our own because, firstly, the Zamco window is closed.
Secondly, even if it was open, the sort of NPLs we have,we can get collections on our own. It is faster where as if you go to Zamco, assuming it was still open, you get a long-dated paper in return, whereas our NPLs are secured and we would rather collect on our own.
CM: What can you say are the challenges you have faced in operating in an environment like Zimbabwe?
BW: You know inflation has kicked in, that’s the major concern going forward, and the economy has not been growing at the rate that it should be growing, again it’s a challenge. The sanctions themselves are challenges, we are unable to open the corresponding bank relationships that I was talking about.
As a bank that should just be a given, but because of the sanctions we are not always able to open corresponding banking relationships with the official banks so that’s a major challenge. If we were not under sanctions we would be getting all the credit lines that we require.
In fact, we would be getting more credit lines than we need. There is also the issue of pricing. Pricing is always an issue, we must fight hard to make sure that we get reasonably-priced credit lines for the benefit of our customers whereas in other countries where risk has not been a major issue, the pricing is quite good and who is the beneficiary? The people in the country benefit from lowly-priced credit lines.
CM: What do you think should be done to manage these challenges?
BW: We just must manage them as banks ourselves, like what we have been doing. Those challenges are there, it’s an environment that we are working on, we must make sure that we do as well as we can under the challenging environment. I think managers are there to manage those challenges. We are managing these challenges through producing good results.
CM: You also happen to be one of the banks that have struggled with high NPLs. What is the long-term strategy in addressing this?
BW: I don’t believe that our NPLs were very high compared to the market. I just believe that we were more transparent because the market surrendered about US$1 billion for NPLs and, going by our market share of loans and all that, we should have surrendered close to US$60 million, but we surrendered US$11-12 million, so it’s not true that our NPLs were very high compared to the market.
CM: In the face of the economic turmoil, what is your view about interest rates and bank charges?
BW: On interest rates, in a normal operating environment, we should be getting positive interest rates, but inflation for March, for example, is over 60%. There is no way you will go and charge your customer +60% and expect to get that money back, so we must be informed by the expected inflation rate not the current inflation rate.
We believe that inflation rate will come down so our interest rates will be much lower than where inflation is today.
CM: What is your outlook in terms of sourcing credit lines going forward?
BW: Because of the make-up of our shareholding structure and the fact that we have generally received credit lines in the past, there is no reason why we cannot get credit lines going forward. If the appetite is there amongst our customers, we should be able to go out and sell a story that will benefit our customers.
CM: How have been the repayment rates of those lines both on your part and the ones you lend to?
BW: So far, we have been able to largely honour our obligations. It is not easy, but we must.
CM: Some banks have been experiencing funding constraints from their correspondent banks as they view Zimbabwe as a high-risk country. What is your comment?
BW: When we talk of funding, we are saying I can only take money out of my correspondent bank which I would have deposited in which my customers have deposited in. I can’t take money from a correspondent bank that my customers have not deposited so I can’t say it’s difficult to get money out of correspondent banks, no it’s not difficult.
A correspondent bank is a bank that sits with my money; when I need it, I will get it but a credit line is a totally different story, it’s a bank that is seeking to go and borrow and that is where the country risk issue is coming from when you are looking for a credit line.
CM: How do you see your performance in full-year 2019?
BW: We are a quoted company, I’m not allowed to say too much about that, but NMB will continue to do well. I remain optimistic but I can’t say much more than that especially on performance in 2019.
CM: What are your key result arrears?
BW: We will be looking at our cost-to-income ratio, return on shareholders’ funds, we will also be looking at our cost in an inflation environment.
Those are areas that we will be looking at. We will make sure that our customer numbers increase.
Fact File: Benefit Washaya
- Washaya commenced his banking career with Barclays Bank in 1978 where he held general managerial positions, including director’s assistant, risk management and business centre director;
- Joined NMB Bank in 1997 where he became divisional director, risk management and was responsible for setting up the risk management systems in the bank;
- Joined Metropolitan Bank in March 2004 as CEO;
- Re-joined NMB as MD on January 7 2008;
- In 2010, he was part of the team that successfully raised $10 million through a rights issue which broadened the bank’s shareholder profile and again in 2013 he was part of the team that was involved in a private placement which raised close to $15 million and brought on board three strategic institutional investors;
- He holds a traceable academic record, being a holder of a Master’s degree in Business Administration, specialising in finance from the University of Wales;
- Certified member of the Institute of Bankers of South Africa and a chartered secretary (ACIS); and
- He is credited for being part of the team that won NMB several prestigious awards, some of which were being awarded in corporate governance practices for five years in a row since 2014.