ZB Financial Holdings Ltd’s net earnings from trading and lending activities in the five months to May 2019 jumped 66% to ZW$12,4 million from ZW$7,5 million in the same period last year helped by an increase in earning asset portfolio that rose to ZW$625,84 million from ZW$453 million.
By Melody Chikono
Total earning assets increased by 38% to ZW$625,8 million from prior year levels of ZW$453 million whilst the ratio of earning assets to total assets came down to 65% from 68%.
ZB CE Ron Mutandagayi last week told shareholders at the company’s annual shareholders meeting in the capital that the relaxation of controls on lending rates by the central bank in April 2019 and subsequent adjustment of interest rates by the group impacted positively on interest and related income.
This growth in earnings was despite interest margins that performed below the rate of inflation.
Mutandagayi said macro-level liquidity suppression measures also resulted in increased recourse to wholesale funding, resulting in an upsurge in interest expenses by 37% to Z$4 million during the period under review from ZW$2,9 million prior year.
Fair value credits on investments made a 500% improvement (ZW$11,5 million) contribution to total income at the level of Z$11,5m, but Mutandagayi said the sustainability of these credits would depend on macroeconomic stability.
“The combination of risk placements at higher levels in line with inflation, as well as a satisfactory claims outturn resulted in the technical outturn from reinsurance business contributing ZW$2,1 million to total income, 77% above the contribution for the five months to May 2018 of ZW$1,2 million.
“On the other hand, reassurance net resulted achieved a 32% growth from ZW$2,8 million for the five months to May 2018 to ZW$3,7 million for the five months to May 2019,” he said.
The group’s total revenue at ZW$57,82 million was 78% higher than the ZW$32,5 million posted in the corresponding period in 2018 with the inflation pull-effect playing a significant part in the growth in the midst of retreating customer transaction volumes as household spending reduced.
The group had a draft profit after tax of ZW$17,6 million, a figure representing a 183% growth on ZW$6,2 million posted in the comparative period in 2018 with annualised return on equity standing at 22%.
Total deposits grew 20% to ZW$528 million in the same period compared to ZW$439 million as at December 31 2018.
The group’s Life Fund stood at ZW$66,4 million as at May 31 2019, 77% above ZW$37,4 million recorded as at December 31 2018 driven by the performance of underlying assets.
Mutandagayi said the general anxiety in the market resulted in marked volatility across markets with the first quarter 2019 performance on the Zimbabwe Stock Exchange showing bearish trends.
This resulted in market capitalisation plunging 17% since the beginning of the year before posting a recovery of 55% in the two months to end of May 2019 as stocks presented an opportunity to hedge balance sheets against inflation.
The group will shortly be setting up a bureau de change operation as well as a micro-finance operation to deepen its product range and strengthen its presence in the micro and small to medium enterprise space.