INTRODUCTION
The Group’s interim results come at a time when our nation and the global economies are battling with the effects of the COVID-19 pandemic. The pandemic has, without a doubt, created a difficult operating environment due to the unprecedented and pervasive nature of this global crisis. I am however pleased to report that in spite of these challenges, the Group managed to achieve a satisfactory performance as a result of my team’s diligence and commitment to duty.
The Group’s core operating income, which excludes the effects of fair value gains on non-monetary assets, in inflation adjusted terms stood at ZW$1 968 206 698 for the six months ended 30 June 2021, indicating a 68% increase from the ZW$1 174 242 103 recorded during the same period ended 30 June 2020. During the period under review, the Group’s operating income largely arose out of the Banking subsidiary’ core operating activities, with core operating income (excluding fair value losses on trade investments) constituting slightly over 100% of total income. This is a significant improvement from the comparative period ended 30 June 2020 during which core operating income constituted 47% of the Group’s operating income. This was largely due to the Group’s strategic thrust to focus more on its core activities as opposed to focusing more on value preservation initiatives given the significant progress the Group had made towards meeting the revised regulatory capital thresholds at the close of the previous financial reporting period.
The Bank’s fee and commission income increased by 128% as a result of our enhanced digital platforms and increased digital touch points in line with the Bank’s digitalisation drive. Net interest income increased by 105% due to significant increases in the volumes of business recorded by the Group during the period under review. The increased business volumes also resulted in a rise in the Group’s operating costs of doing business, although there were some non-recurrent one off expenditure items incurred during the period under review.
The Group is currently running with four strategic pillars namely, Broadening the group structure, Building a digital bank, Customer Value and Enhanced Shareholder value and Employee value and I am pleased to advise that we have started seeing the benefits of our strategic initiatives as signalled by our satisfactory performance during the period under review.
DIGITAL INNOVATIONS AND ENHANCEMENTS
We have continued with the Banking subsidiary’s digitalisation drive which has resulted in the rolling out of more customer centric products, much to the delight of our valued customers. During the period under review, the Bank launched 5 disruptive digital products namely:
1. A Virtual Branch that allows customers to conduct cash transactions on their phone and simply walk into the branch to either drop or pick cash;
2. An automated loan application that allows customers to apply for personal loans on shortcode *241# and access near instant disbursements without the need to complete any paperwork;
3. Instant NMBLite account opening via shortcode *241#;
4. Digital account opening for the normal KYC accounts on NMBConnect allowing the customer to upload KYC documents without the need to visit the Bank; and
5. A Virtual Service Excellence Representative Assistant, named Sera.
Furthermore, the bank has completely digitized its internal operations, which has resulted in the complete elimination of paper in our internal processes. This also complemented our virtual branch, which has also completely removed the need for paper and form filling across our branch network. Notwithstanding the improved efficiencies, the elimination of paper and form filling has contributed immensely towards the fight against the spread of Covid 19 thereby safeguarding our customers and staff in the process. Through our Robotic Process Automation workstream, we have also been aggressively developing robots to perform back office functions including reconciliations. At reporting date, we had deployed approximately 22 functional robots.
As we build our digital platforms, we are also cognizant of the cyber related threats and we have been channeling significant investment towards our ICT Security systems, in particular Cyber Security to ensure our platforms and customers are protected. We have collaborated with some of the best global cyber security solution providers to ensure our systems are secured.
We have continued to transform NMB Bank Limited into a Digital Bank, without losing the excellent customer service we are known for.
We therefore continue to serve businesses, high net worth customers, SMEs and the broader market segments through digitally enabled products and platforms.
The Bank also managed to roll out the zero-rated mobile banking facility which enables our customers to access the Bank’s mobile banking platforms without using their own mobile data. We remain committed to continue pursuing more exciting initiatives to further enhance the Bank’s customer experience as well as continue to reduce the cost of transacting for our valued customers.
CORPORATE SOCIAL INVESTMENTS
During the period under review, the Group channelled its Corporate Social Investments towards the support of disadvantaged and vulnerable groups, promotion of the Arts as well as fostering financial education and inclusion amongst the youth. Donations were made to institutions which include but are not limited to KidzCan, for treatment of children living with cancer. On the promotion of Arts, the Group was a sponsor of the 2021 NAMA Legends Edition, whose main aim was to appreciate the role Arts and Music has played in our society spanning four decades. The Group also participated in Youth Financial Education during the Global Money Week, through sharing financial nuggets. The 2021 theme for the Global Money Week was ‘Take care of yourself, take care of your money’.
SUSTAINABILITY
The Group, through its Banking subsidiary remains committed to financing the education sector, agriculture, health, water, property and construction as well as supporting the Small and Medium Enterprises (SMEs), the youths, the disadvantaged, vulnerable groups in addition to supporting various environmental conservation initiatives.
With the prevailing Covid-19 pandemic, our foremost priority has been to safeguard the health and safety of our employees and customers.
Our collective ability to adapt to a new and unforeseen reality has also shown us what we can achieve when we all work together. We believe that this is an important lesson to draw upon as we set out to transform our business in the transition towards a more sustainable future.
The Covid-19 crisis led us to adapt and digitize a significant range of services. Despite the challenges, we managed to continue offering uninterrupted services to our customers across all sectors and geographical areas. Our employees were also adequately equipped to perform critical tasks remotely since the onset of the pandemic. I am grateful to all my colleagues, their commitment is proof of how we value our customers and the welfare of the communities we operate in.
GROUP RESULTS
HYPERINFLATIONARY REPORTING
On 11 October 2019, the Public Accountants and Auditors Board (PAAB) issued a pronouncement to the effect that the Zimbabwean economy had met all conditions necessary to be classified as a hyperinflationary economy. On that basis, the Directors have prepared the accompanying financial statements using the hyper-inflationary accounting basis to achieve fair presentation at the reporting date of 30 June 2021. The following results commentary is primarily on the Group’s hyperinflationary adjusted financial statements at the reporting date.
Financial performance
Profit before taxation was ZW$566 732 458 (30 June 2020 – ZW$1 745 617 359) during the period under review and this gave rise to total comprehensive income of ZW$423 625 929 (30 June 2020 – ZW$2 050 429 138). The Group did not record any revaluation gains on land and buildings and investment properties in inflation adjusted terms as we did not perform independent property valuations for the interim reporting purposes. The Group achieved a basic earnings per share of 60.71 ZW$ cents (June 2020 – 364.30 ZW$ cents) and this translated into the headline earnings per share of 61.07 ZW$ cents (30 June 2020 – 362.99 ZW$ cents).
Total income amounted to ZW$2 142 254 827 and this was 17% down from ZW$2 580 045 252 recorded during the six months ended 30 June 2020 mainly due to other income as a result of a significant reduction in fair value gains on investment properties due to the exchange rate stability during the period under review. Excluding revaluation gains, The Group’s core banking income increased by 71% from ZW$1250 899 080 recorded during the six months ended 30 June 2020 to ZW$2 144 077 300 for the period under review.
Operating expenses amounted to ZW$1 283 729 775 and these were up 89% from ZW$677 471 176 recorded during the six months ended 30 June 2021. The increased costs were a result of increased transactional volumes in line with the Bank’s digital drive as well as increased administration and operational costs.
The Group recorded an impairment credit charge on financial assets measured at amortised cost amounting to ZW$81 988 552 compared to a charge of ZW$52 115 542 during the six months ended 30 June 2020 due to growth in the banking subsidiary’s financial assets and a more conservative provisioning approach in light of the possible impact of Covid 19 on the operations of our borrowing customers.
The Bank’s non-performing loans (NPLs) remain very low, with the NPL ratio closing the period ended 30 June 2021 at 0.63% compared to the 0.44% recorded at 31 December 2020. The low NPL ratio is largely due to aggressive collections, stricter credit underwriting standards and growth in the loan book.
Financial position
The Group’s total assets increased by 15% from ZW$12 861 300 266 as at 31 December 2020 to ZW$14 772 257 956 as at 30 June 2021 mainly due to a 36% increase in loans and advances and other assets and a 14% increase in cash and cash equivalents.
Gross loans and advances increased by 67% from ZW$2 959 262 732 as at 31 December 2020 to ZW$4 942 714 327 as at 30 June 2021 mainly due to increased advances during the period under review in view of the Bank’s growth trajectory.
Total deposits increased by 22% from ZW$7 558 402 602 at 31 December 2020 to ZW$9 184 847 394 as at 30 June 2021 as a result of aggressive deposit mobilization and the positive impact of our digital platforms.
The Bank maintained a sound liquidity position with a liquidity ratio of 44.15% which was above the statutory minimum of 30%.
Capital
The banking subsidiary maintained adequate capital levels to cover all risks as reflected by a historical cost capital adequacy ratio of 29.41% as at 30 June 2021 (31 December 2020 – 43.78%). The ratio was well above the regulatory minimum of 12%.
The Group’s shareholders’ funds and shareholders’ liabilities increased by 5% from ZW$4 700 135 150 as at 31 December 2020 to ZW$4 930 563 116 as at 30 June 2021 as a result of the current period’s total comprehensive income.
The Bank’s regulatory capital as at 30 June 2021 was ZW$2 721 948 855 in historical cost terms and was above the minimum regulatory capital of ZW$25 million. The Bank submitted its updated capitalisation plan to the RBZ in terms of the requirements for a Tier 1 bank to have a minimum Zimbabwe dollar equivalent of USD30 million by 31 December 2021. As at 30 June 2021, the Banking subsidiary’s regulatory capital had exceeded the minimum of USD30 million required by 31 December 2021 on the back of the Bank’s strong financial performance in the period under review.
LEGACY DEBTS
The banking subsidiary owed USD13 840 412 to various lines of credit providers as at 30 June 2021. The Bank registered these foreign debts with the Reserve Bank of Zimbabwe (RBZ) as required by the regulatory directives. During the financial period ended 31 December 2019, the Bank transferred to the RBZ the ZW$ equivalent of the foreign debts at a rate of USD/ZW$1:1. The RBZ has indicated that they will be issuing a USD denominated instrument for these debts and consequently these debts and the RBZ deposits have been accounted for at the closing exchange rate of USD/ZW$ 1:85.4234 at 30 June 2021. This effectively values the original credit lines at a rate of 1:1 on a netted off basis. The RBZ approved the line of credit balances amounting to USD13 840 412.
APPRECIATION
I wish to express my heartfelt gratitude to all our valued clients for continuing to believe in us and entrusting us with their business during these difficult times. I also wish to extend my gratitude to my fellow board members, our shareholders, regulatory authorities, management and staff for their unrelenting support.
B. P. WASHAYA
CHIEF EXECUTIVE OFFICER
Related Download
NMBZ Holdings 2021 Interim Financial Results.pdf