CBZ Profits More Than Doubles, Rising NPLs Pose Future Threats

Commercial Bank of Zimbabwe (CBZ) Holdings profits for the year 2018 sprung from more than double from $ 27.8 million realized in 2017 to $ 72.2 million driven by improved electronic transactions income and net interest but high levels of loan defaults poses future threats.

The bank has declared a dividend per share of $ 1.24 up from $ 0.26 in 2017.

Total comprehensive income grew to $ 75.2 million as compared to $ 29.7 million recorded in the previous year.

Non-interest income to total income ratio increased steadily to 54.2 percent during the year from 52.2 percent, a reflection of the group’s diversified income generation strategies.

This has seen improved performance in total deposits to $2.07 billion up from $ 1.8 billion recorded in 2017.

But it’s the latest innovation in digital banking and other financial services that has cut operating expenses at the same time increasing earnings for the group, and will likely be its biggest leverage going forward.

“Migrating customers to digital platforms really reduce costs of service. This is what most of us are doing, so you can see we are trying to leverage a lot on our CBZ Touch, so that we can deliver what we deliver through cheaper phones as a delivery channel,” Group chief executive officer, Dr Blessing Mudavanhu told analysts.

The company has already seen an increase in Point Of Sale (POS) machine of 30 percent while the number of merchants, alliances and agencies went up by 14 percent.

The company is riding on positive sentiment following its nomination as the country’s best bank in 2018 by US-based Global Finance Magazine but high Non-Performing-Loans ratio poses serious future threats.

Global Finance Magazine noted that the company managed to skirt past slow growth in 2018 and the volatile Group’s NPL position “could hamper future blending as non-performing loans continue to rise”.

Gross advances stood at $ 598.7 million against NPLs of $100 million reflecting a 16.4 percent NPL ratio, a far cry from the RBZ target of five percent.

Agriculture had the highest advances by the bank of 145.2 million with NPLs reaching $ 49.7 million and reflecting a 34.2 percent NPL ratio.

“The group’s capitalization reached $ 111.7 million against the regulatory $100 million requirement for 2020, and we shall continue to support agriculture and our liquidity status allows us to lend more,” said Mudavanhu.

The company intends to improve its lending by 35 percent in 2019.