Stanbic Bank Zimbabwe has shrugged off the prevailing harsh economic environment to post an impressive set of results for the year ended December 2017 headlined by a profit after tax of US$27.6 million, up 30% from the prior year’s US$21.2 million.
The bank’s Chairman, Gregory Sebborn, attributed the performance to the returns on the various interest earning instruments that the leading financial services institution invested in.
In a statement accompanying the results, Sebborn said income earned from the growing transaction volumes on the various innovative electronic channels that Stanbic Bank offers as well asgood recoveries on previously downgraded facilitiescontributed significantly to the bank’s performance.
He said the operating environment presented a plethora of challenges such as broad money supply growth which grew by 47.97% to US$8.02 billion in October 2017 compared to USD$5.42 billion in November 2016.
Other challenges included erratic rainfall patterns for the 2017 season which affected income from the agricultural sector, the fiscal budget deficit which grew from 2.5% of GDP in 2014 to 10% by 2016 and is expected to increase further in 2018 mainly due to increased quasi-fiscal activities, and expenditures related to the election process.
Sebborn said although the export performance during the first nine months of 2017 improved by an estimated 19% compared to same period in 2016, bolstered by increased gold, chrome and ferrochrome exports, other key foreign currency sources such as Foreign Direct Investment (FDI), international remittances and portfolio investments remain significantly subdued.
“Despite these challenges in the macroeconomic environment, the Bank continued to sustain growth in profitability, closing the year with a profit after tax of USD27.6 million which was 30% ahead of the prior period profit after tax of USD21.2 million,” said Sebborn.
As at 31 December 2017, Stanbic Bank’s qualifying core capital stood at US$134.3 million, up from US$106.6 million in 2016, against the regulatory minimum of US$25 million and ahead of the USD100 million threshold set for the year 2020.
Sebborn said the accounting standard IFRS 9 came into effect on 1 January 2018 resulting in a significant but anticipated decline in capital in order to accommodate increased credit provisions for financial instruments.
“Despite this decline, the Bank remains adequately capitalised and compliant with all regulatory requirements, with capital remaining above the USD$100 million mark,” said Sebborn.
He said the country’s growth prospects in the short term are projected to remain subdued, pending the outcome of the mid – year elections and the promised structural adjustments and reforms. These reforms are aimed at addressing low business confidence, foreign currency shortages, rising inflationary pressures, restoration of fiscal sustainability, and the fostering of growth.
The challenges associated with these anticipated reforms will be significant, but the bank remains optimistic of medium term sustainable growth in economic activity despite the current challenges.
“Stanbic Bank continues to maintain high standards of corporate governance, ensuring that its conduct is above reproach. It complies with regulatory and corporate governance requirements, and is committed to advancing the principles and practice of sustainable development and adherence to the laws of the country. During the period under review, the Bank remained compliant with all regulatory requirements and RBZ directives, in all material respects,” added Sebborn.
Stanbic Bank Chief Executive, Joshua Tapambgwa said it was pleasing that the bank had defied various economic challenges which included, among others, the unbearable cash and foreign currency shortages.
Tapambgwa said a 17% growth was recorded in the Bank’s net interest income which increased from US$47.2 million in 2016 to US$55.1 million bolstered mainly by the additional short term investments which were acquired during the year.
The 2017 fee and commission income deteriorated from US$33.5 million in the prior period to US$32.6 million as the increased surrender requirements on platinum and chrome exports had a negative impact on the volumes of customer foreign payments which the Bank could process as Nostro reserves remained depleted.
“The charge for credit impairments for 2017 was US$2.1 million having declined from US$8.4 million in 2016 as the Bank’s enhanced collection efforts on non-performing loans and reduced written off facilities continued to bear positive results,” CEO Tapambgwa said.
Total operating expenses increased by 12% from US$57.5 million in the prior year to US$64.1 million largely because of the impact of business expansion as the Bank remained competitive by rolling out new products into the market as well as extending its digital channels customer offering.
Stanbic Bank’s net lending book increased by 21% from US$273.5 million in 2016 to US$330.4 million largely driven by new assets which were written combined with the increase in facility utilisation by some counterparties who required local funding for working capital purposes.As the country remained crippled by chronic foreign currency shortages, the Bank’s customer deposit base increased from US$701 million in 2016 to close the year at USD1.2 billion as depositors failed to utilise their funds for settlement of foreign obligations.
Joshua expressed his continued gratitude to the Stanbic Bank Zimbabwe team for these pleasant results which would not have been possible without their resilience, team work and commitment to serve customers better in an increasingly fragile operating environment.