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The bank’s cumulative profit for the four months to April amounted to $2,3 million from $2 million the prior year

Golden Sibanda Senior Business Reporter
ZB Holdings says its non-performing loans are unlikely to fall below the Reserve Bank of Zimbabwe set threshold of below 10 percent by June and has engaged the apex bank over the issue.

This comes as the group has agreed with RBZ’s special purpose vehicle, Zimbabwe Asset Management Company, for the takeover of $6,3 million of its bad loans for which ZB will take a 56 percent discount and, effectively, get a net of $3,5 million.

Group chief executive Ron Mutandagayi told shareholders at the annual general meeting on Friday that NPLs had remained high at 20 percent of total loans by April 30 and are unlikely to reduce below 10 percent by end of June.

The central bank has set June 30 as the deadline for banks to reduce NPLs, which peaked at 20 percent in September 2014, to 10 percent and further down to 5 percent by the end of this year.

“The NPL ratio is, therefore, unlikely to reduce below 10 percent by June 30, 2016. Discussions with regulatory authorities on this matter are ongoing,” the ZB group CEO said.

Against this background, Mr Mutandagayi said management of NPLs remains a key focus area for the group and this will include aggressive recovery of debts and lending to quality clients.

He said while simply increasing new loans and advances would bring the ratio of NPLs down, by increasing the denominator, this would not address the core issues attributed to the difficult macro-economic climate in the country.

“Such an approach may have the negative impact of a poor asset quality in the future and consequently an increased charge against capital. A cautious approach focusing on the aggressive recovery of debts combined with new lending to good quality clients would be pursued,” Mr Mutandagayi said.

Like many other financial institutions ZB will sell, at a discount, $6 million of its bad loans to the RBZ’s special purpose vehicle formed to cleanse banks’ loan books of toxic loans and allow the institutions to lend fresh credit to borrowers.

Giving an update on the financial performance of the group for the four months to April 2016, Mr Mutandagayi said the performance noted in the previous year has continued, but the pace has slowed down due to difficult economic conditions.

The group’s operating income increased marginally by 1 percent to $19,4 million in April from 19,2 million the prior year driven by a 19 percent growth from trading and lending activities and 38 percent increase in re-insurance income.

Cumulative profit for the four months to April amounted to $2,3 million from $2 million the prior year while cost to income ratio was 78 percent from 76 percent in the same period last year.

However, the performance was offset by a 21 percent reduction in net life assurance income, as well as 4 percent reduction in non-funded income, Mr Mutandagayi said.

The increase in income from trading activities was influenced by the release of discounts on treasury bill, 18 percent reduction in funding costs and lower charge on loan impairments, which stood at $1,5 million for the period to April.

Reinsurance premiums increased due to renewals which were brought forward to the first quarter of 2016. Of the gross premium written, 86 percent was written from local operations while 14 percent was sourced from Mozambique.

Net life insurance reduced by 21 percent largely influenced by increased death claims on the ZB cash funeral cover to April while life assurance cover expense expanded by 33 percent.