PHILLIMON MHLANGA
Stanbic Bank Zimbabwe reported an inflation-adjusted loss of ZWL$9.7m for the full year to December 31, 2019, from a profit of ZWL$233 596 in the corresponding period in 2018, with the downbeat performance attributed to turbulence in the operating environment.
Zimbabwe’s economic crisis deepened during the period under review.
The economy contracted by -6.5% in 2019 largely due to significant policy changes which included the introduction of the Zimbabwe dollar after ditching the multi-currency regime which had been in existence since February 2009, low business confidence, intensifying foreign currency shortages, crippling fuel and power shortages which stifled business performances, surging inflation and waning disposable incomes, among many.
Government project a 3% growth this year but due to the coronavirus pandemic and continued economic deterioration, Zimbabwe is likely to experience a pandemic-driven recession.
The lender’s net interest income, the difference between interests earned and interest expended, soared 4% to ZWL$451m during the period under review from ZWL$432.6m in the prior year, largely buttressed by the growing demand for local funding as working capital requirements continued to increase in a spiralling inflationary environment.
The situation was compounded by the acquisition of short-term investments in the period to strengthen the bank’s balance sheet efficiencies, the bank said.
The bank’s inflation-adjusted net fee and commission income increased 58% to close the period at ZWL$381.8m from ZWL$240.2m in 2018 largely due to the impact of the continued depreciation of the Zimbabwe dollar against the United States dollar on the bank’s foreign-denominated fee and commission lines.
This was coupled with the regular upward reviews of fees in response to the elevated cost of doing business in a surging inflationary environment.
The lender has made a 290% increase in credit loss provisions to the tune of ZWL$136m from ZWL$34.9m in 2018 due to the new interest-earning assets which were written in the period-both customer lending assets and short-term investments.
The increasing turbulence in the operating environment which was characterised by inflation and increased currency volatility impacted negatively on the bank’s inflation-adjusted operating expenses increased by 112% to ZWL$957m from ZWL$451m in the previous year.
The extensive depreciation of the local currency against the greenback led to an exponential increase in the bank’s foreign-denominated expenses when extended in the local currency terms.
These expenses included hardware and software license fees, data line requirements, travelling expenses, bank charges and insurance.
The increased demand for local funding in a period plagued by price escalations as suppliers continued to price defensively in a volatile operating environment saw the bank’s net lending book growing by 142% as working capital requirements continued on an upward trend.
The bank closed the year with a qualifying core capital of ZWL$651.2m against a regulatory minimum of ZWL$25m, meaning the bank has remained ahead of 2020 the minimum capital threshold which is the local currency equivalent of US$30m. Stanbic Bank chairman, Gregory Sebborn projects a soft business outlook.
“The outlook to the year 2020 remains grim on account of the potential recurrence of the myriad of challenges besetting the economy.
Unless the government makes serious interventions, the situation is unlikely to improve,” Sebborn said.
