30 AUGUST – 2022 – Leading financial services institution, Stanbic Bank, has demonstrated its resilience by posting an inflation adjusted profit of ZW$11.2 billion for the six months to 30 June, 2022, up from ZW$3.5 billion in the comparative period in 2021.
The Standard Bank Group subsidiary shrugged off the difficult economic environment mired in inflationary pressures and a myriad of other operating challenges to demonstrate its tag as a top-notch financial services provider through this impressive set of results.
Stanbic Bank Chairman Gregory Sebborn said the strong set of results were driven by the institution’s proactive response to the growing working capital requirements from customers through the provision of lending facilities in both local and foreign currency at a time when the cost of doing business had been trending upwards.
In a statement accompanying the results, Sebborn said revaluation gains recorded on the Bank’s foreign currency positions combined with fair value adjustments on investment properties as the ZW$ currency continued to weaken against the US$ also contributed significantly to the performance.
“In addition, the level of business activity which was experienced during the period had improved as business operations normalized after the two-year COVID 19 era had eased,” said Sebborn.
The Standard Bank Group subsidiary ended the period under review with a qualifying core capital of ZW$32 billion, surpassing the local currency equivalence of the required US$30 million regulatory minimum.
Stanbic Chief Executive (CE), Solomon Nyanhongo, said, on a historical cost basis, a profit of ZW$22.2 billion was recorded in the first half of the year in comparison to ZW$2 billion in the prior period.
Nyanhongo said the Bank’s net interest income grew by 66% from ZW$7.5 billion in the comparative period to ZW$12.3 billion.
“This growth was largely spurred by the strong growth in interest earning assets as new lending assets were written compounded by the upward review of interest rates during the period. Fee and commission income for the period had increased by 21% from ZW$7.8 billion in 2021 to ZW$9.5 billon largely underpinned by the improved volumes of transactions which were being processed on our various service channels,” said Nyanhongo.
He said the Bank’s trading revenue improved, supported largely by the better trading activity in the market combined with revaluation gains recorded on foreign currency positions. The Bank’s credit impairments ended the period at ZW$1.1 billion growing from a net release of ZW$305 million in the prior period, on the back of new lending assets which had been written during the period.
In the prior period, significant recoveries were recorded on the Bank’s financial assets.
Total operating expenses increased by 50% from ZW$9.4 billion in the comparative period to ZW$14.2 billion largely because of the impact of the continued weakening of ZW$ currency against the US$ on the Bank’s foreign denominated expenses which have increased substantially in local currency terms.
The Bank’s net lending book grew in real terms by 10% from ZW$67.9 billion in December 2021 to ZW$74.8 billion as new lending assets were written in an effort to support clients in meeting their working capital requirements.
Nyanhongo said Stanbic continued to support its customers through the provision of the required funding structures to meet their specific needs.
Some of the availed funds went towards purchase of additional road construction equipment and working capital to fulfill government’s road rehabilitation programme which will improve the efficiencies with which goods and services are transported within Zimbabwe and into the region.
“The repaving of the Beitbridge-Chirundu Highway which is the main trade facilitation route between Durban, South Africa and the Northern countries – Zimbabwe, Zambia and DRC is providing employment to communities around the project thus improving rural incomes. Stanbic disbursed facilities amounting to US$100 000 for the purchase and installation of MRI machines in public hospitals which will go a long way in alleviating the shortage of radiology services in the country,” said Nyanhongo.
He said Stanbic also provided funding in the form of a letter of credit facility to an electrical company to support development of the Green Economy (Renewable Energy and Water Management). The project is of national importance as it will improve the availability of piped water in the country.
Nyanhongo saluted Stanbic Bank staff members for their continued resilience and commitment to deliver commendable financial results as the institution navigated an increasingly challenging operating environment.
Sebborn noted that the operating environment in the country remained challenging owing to numerous challenges such as a slowdown in economic growth; rising inflationary pressures and rising interest rates.
The slowdown was noted by the Bretton Woods Institutions with both the International Monetary Fund (IMF) and World Bank having reviewed the Gross Domestic Product (GDP) growth forecast for Zimbabwe from 5% to an estimated 3% for 2022 compared to the growth rates of 6-7% in 2021.
The slowdown in growth prospects in 2022 is attributed to the erratic rainfall patterns resulting in reduced agriculture output, impact of the Russia – Ukraine crisis in the local economy resulting in increased fuel and food prices, policy volatility which has eroded confidence in the ZW$, and foreign currency supply bottlenecks in the formal sector resulting in continued buildup of the foreign currency auction backlog.
Sebborn noted that annual inflation rose from 60.7% in December 2021 to 191.7% by June 2022 and mainly attributed to growing fiscal expenditure largely because of grain purchase, foreign currency purchase (for the 40% export surrender portion), financing of infrastructure projects, salary adjustments, social service-related expenditures, and other election related expenditure.
“In addition, there is imported inflation stoked by rising international food prices (maize, oil seeds, wheat) and energy products following the Russia-Ukraine conflict. The obtaining interest rate regime is primarily based on the policy to contain inflationary pressures,” said Sebborn.
The economy is likely to remain constrained by low business confidence, policy inconsistencies, high inflation, foreign currency shortages, low disposable incomes and unstable energy supply. The policy environment and fiscal space are likely to remain constrained to contain these challenges in the short to medium term outlook.