HARARE – Listed financial services group, ZB Financial Holdings (ZBFH) has secured $30 million which will go towards supporting the productive sectors of the economy.
Group chief executive officer, Ron Mutandagayi revealed that the line of credit was secured from regional financiers. He, however, did not reveal the identity of the regional financiers that availed the funding.
This, he said, would go a long way to help take Zimbabwe’s productive sectors off life support and at least start to put them on road to recovery.
“The group has been able to mobilise a total of $30 million in lines of credit with regional banking partners,” Mutandagayi told Business Times adding: “But, they (regional financiers) prefer anonymity”.
He said the credit facilities are expected to support productive sector recovery and stimulate export performance.
The development comes at a time when Zimbabwe’s industry is failing to recover due to the lack of long-term funding at concessionary rates.
Also, lending by banks over the last few years has always been skewed towards individuals at the expense of the productive sectors.
Of the $3,8 billion total banking sector loans and advances as at December 31 2017, more than a quarter was channelled towards individuals.
Local companies require cheap long-term financing to replace obsolete equipment and become effective, thereby reducing the cost of production. Banks on the other hand are still constrained to offer long tenure loans due to the short-term nature of deposits with demand deposits accounting for more than half of the $8,48 billion total banking deposits as at the end of December 2017, according to official central bank data.
If available, long-term loans are offered at punitive interest rates of more than 20 percent.
This is despite that the Reserve Bank of Zimbabwe has directed banks to offer borrowers with medium credit risk to access loans at a cost of between 10 to 12 percent per annum.
Those with high credit risk to access loans at a cost of between 12 percent and 18 percent.
In its financial results for the six months to June 30 2018 released last week, ZBFH’s profit for the period grew by 15 percent to $9,35 million from $8,17 million in the comparable period in the previous year.
This resulted in earning per share increasing by 16 percent to $0, 0578 during the period under review from $0, 0499 same period last year while the annualized return on equity improved from 16 percent to 18 percent over the same period.
Total income during the reviewed period grew 12 percent to $38,6 million from $34,7 million in the same period in the previous year due to an increase in electronic transactions and net income from lending activities.
Mutandagayi said: “The increase is primarily driven by an expansion in net income from lending activities which increased by 39 percent as well as an increase in other operation income which increased 14 percent.”
“The 14 percent increase in other income from $20,1 million for the half year ended June 30 2017 to $22,9 million for the half year ended June 30 2018 was largely driven by 14 percent increase in banking customers as well as a general increase in the number of transactions particularly through electronic banking channels.”
The group’s net income from lending activities increased to $10,88 million in the period under review from $7,85 million in the 2017 comparative period.
The net interest income was up 12 percent to $10,2 million from $9,1 million earned in 2017 similar period.
Mutandagayi said revenue from the group’s insurance sector remained flat at $4,9 million.
ZBFH’s cost to income ratio for the period was 72 percent as cost expansion pressure rose, Mutandagayi said.
“Operating expenses increased due to higher acquisition costs in banking and insurance operations, adverting and brand promotion expenses,” he said.
Total assets grew 10 percent to $57,8 million in the period under review following a 19 percent increase in cash and short-term funds, a 59 percent increase in investment securities and a 20 percent increase in treasury bills (TBs).
Mutandagayi indicated that coupons on TBs acquisition on the primary market ranged between seven percent and 10 percent during the reviewed period whilst discounts on secondary market trades ranged between four percent and 14 percent.