Maravi

(HERALD) Banking sector defies odds

Banking sector defies odds
By Perry Kaande

THE banking sector has shown resilience in the face of hyperinflation, foreign currency shortages and tight liquidity — posting strong half-year to June 30 results. Out of nearly 10 financial institutions that have released results so far, ABC Holdings, ZB Bank and CBZ took the first three spots while at the other end Highveld Financial services propped up the table.

A profit of $893 billion gave ABC pole position, although the Botswana headquartered entity lamented persistent dollar depreciation.

"The results are pleasing particularly when viewed against a massive depreciation of the Zimbabwe dollar, coupled with considerable pressure in lending and foreign exchange margins in most of the subsidiaries" said group chairman Mr Oliver Chidawu.

ZB Bank was not to far behind with a net profit of $814 billion helped by strong profits to subsidiaries.

ZB, whose foreign currency inflows remained low in the six months, said that there was need for Government to implement clearly defined pricing structures in the foreign exchange market.

Last week Minister of Finance Dr Samuel Mumbengegwi revised the exchange rate to $30 000 per United States dollar from $250.

Tight liquidity conditions were experienced during the first half of the year due to increased statutory reserve requirements, ranking at 45 percent of cumulative asset portfolio.

On the other hand, yearly inflation pegged at 1 281 percent in December 2006 rose sharply to reach 7 634 percent by end of July 2007.

The sharp rise was caused mainly by the increase in money supply growth and declining output.

However, this did not dampen business in the CBZ camp, coming out with a figure of $705 billion to make it the third highest profit making bank in the interim period.

CBZ said deposits from customers, advances and property revaluations drove profit.

Kingdom Holdings posted a profit of $430 billion, an increase of over 400 percent from the same period last year reflecting tremendous growth in earnings in all of the group’s main income streams.

Improved diversion of earnings, following the strong growth in the reinsurance and building society subsidiaries, allowed FBC’s profit to grow by 16 189 percent reaching $323 billion from $1,99 in 2006.

Despite the hyperinflationary environment the group managed to maintain its income ration unchanged at 30 percent.

Standard Chartered’s post tax profit in historical terms increased 1 096 percent to $228 billion.

However, inflation adjusted results show that the bank realised a loss of $42 billion which is higher compared to the results in 2006.

"This reflects the negative impact of hyperinflationary environment to entities that are well capitalised and liquid. The monetary loss adjustment penalises banks for holding excess monetary assets over liabilities and this negates prudential requirements," said Stanchart.

Highveld’s liquidity position remained robust with the portfolio mix remaining skewed toward treasury bills and government paper resulting in the achievement of the sound liquidity and capital adequacy of 112 percent and 66 percent respectively.

Highveld, having a modest profit of $3 billion should not be construed as a poor performer.

Operating overheads increased significantly on the back of the hyperinflationary environment and profit before tax grew by 357 percent.

Although economic activity is expected to remain subdued, the banking sector is bracing for the future with optimism that the second half will be better than the first.

Shareholders and clients can look forward to aggressive retail banking and expansion of product range and branch network especially amongst the top commercial banks.

Labels: BANKING, THE HERALD

posted by MrK @ 3:59 AM