Retrenchment bill dents banks’ earnings

LIVINGSTONE MARUFU

When companies retrench workers, the immediate focus is often on the hardship faced by employees who lose stable incomes and struggle to maintain their livelihoods.

But while workers bear the social and economic pain of job losses, companies themselves also absorb significant financial shocks through hefty severance and restructuring packages.

Zimbabwe’s banking sector is now feeling that burden after spending more than US$50m on retrenchment and restructuring costs in 2025, a development that has weighed heavily on profitability across several major lenders.

According to statistics from the Zimbabwe Banks and Allied Workers Union (ZIBAWU), at least 516 banking sector employees lost their jobs during the year. CBZ Holdings accounted for the bulk of the retrenchments after cutting 347 jobs, followed by ZB Financial Holdings with 75, while NMBZ Holdings and Nedbank Zimbabwe each retrenched 47 employees.

A top CBZ Holdings Limited executive told Business Times that restructuring exercises inevitably come with huge financial implications.

“Restructuring costs should have been accrued for in FY2024, but the payments were made in the first quarter of 2025. A total of US$30.2m was paid for this exercise,” the CBZ executive said.

For ZB Financial Holdings (ZBFHL), the rationalisation programme significantly affected earnings during the period under review.

The group recorded a profit after tax (PAT) of ZWG0.679bn compared to a restated ZWG1.042bn achieved in 2024.

The decline in profitability was largely attributed to reduced exchange gains following the stabilisation of the Zimbabwe Gold (ZWG) exchange rate, as well as rising retrenchment-related costs.

ZBFHL chief executive officer Dr Shepherd Fungura said operating costs surged to ZWG2.923bn from ZWG1.813bn due to the staff rationalisation exercise undertaken during the year.

“The group incurred rationalisation costs as it continued to optimise its staff complement. Cost savings are expected in the coming years as processes become fully automated,” Dr Fungura said.

“The group’s profit after tax closed at ZWG0.679bn in 2025 from ZWG1.042bn in 2024. The decline was mainly as a result of reduced exchange gains and increased operating costs arising from the staff rationalisation exercise.”

The impact was also evident at the group’s flagship banking unit, ZB Bank Limited, whose profit after tax declined sharply to ZWG0.433bn in 2025 from ZWG1.080bn in 2024.

Management attributed the drop to increased operating expenses linked to the restructuring programme.

NMBZ Holdings was also hit hard by restructuring costs as the bank accelerated its shift towards digital banking and operational efficiency.

NMBZ chief executive officer Gerald Gore said the restructuring exercise significantly weighed on the bank’s short-term performance.

“Restructuring expenses of ZWG127m [more than US$5m] were incurred during the year, primarily related to a change in strategic focus towards a digital and more efficient operation. These costs include severance payments and other termination costs,” Gore said.

“We expect these restructuring efforts to result in future cost savings and improved operational efficiency.”

Gore said the bank’s overall performance remained resilient despite the impact of two major non-recurring items that dragged down earnings during the reporting period.

“Notably, the group undertook a comprehensive staff rationalisation and restructuring exercise at a cost of ZWG127m, which weighed on short-term profitability,” he said.

“The restructuring programme was a deliberate strategic intervention aimed at streamlining operations, optimising our cost base, strengthening risk management and enhancing operational efficiency across the group.”

“While the immediate financial effect has been adverse, the initiative is expected to deliver sustainable long-term benefits through improved productivity, stronger cost discipline and enhanced competitiveness.”

NMBZ’s profitability was further undermined by a tax dispute arising from the disallowance of interest expenses by tax authorities in the calculation of taxable income.

The tax adjustment was applied retrospectively from 2019, resulting in additional tax charges of ZWG94.5m in the 2025 financial year and ZWG43.7m in 2024.

Although the relevant provision of the Income Tax Act has since been repealed with effect from 2026, the repeal was applied prospectively.

Management said it continues to exercise prudence in provisioning and capital management while focusing on restoring earnings momentum and strengthening the group’s financial position going forward.