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Business Reporter
ZB Financial Holdings said it is expecting a positive outlook in the second half after posting $4 million after tax profit in six months to June, despite tightening of interest margins. The group returned to profitability with a $4,1 million net profit from a prior comparable period loss of $2,4 million on the back of effective cost-containment measures.

Chief executive Mr Ron Mutandagayi told analysts on Wednesday that cost control will remain a strategic imperative for the group, with cost-efficiency currently at 76 percent. Mr Mutandagayi said while the recent RBZ guidelines on interest rates “will slow down growth” in banking revenues, the group’s units will continue to operate profitably.

The central bank recently reached an agreement with local banks to cap interest rates at 18 percent, as part of concerted efforts to lower the prohibitive cost of finance. Banking institutions are required to effect the new lending rates for both existing and new borrowers, with effect from 1 October 2015. The RBZ said in view of high interest rates obtaining in the economy, there is scope for reduction to ensure that lending rates support productive sectors of the economy. Some banks were charging interests rates of as much as 35 percent, thus making borrowing unsustainable.

“Earnings trend has continued up to August, 2015 on the back of tight cost control; up 315 percent on a year-on-year basis . . . cost efficiency at 76 percent (while) some material recoveries on, hitherto, non-performing loans expected to strengthen second half performance,” said Mr Mutandagayi. “Focus now is on value creation and sustainability.”

He said the group will roll out a new suite of digital channels (Mobile Banking & Internet Banking) by end of this month while more than 3 000 agents were registered to sell electricity vouchers and offer limited banking services. He added that paperless banking concept was extended to all branches during the period under review. During the period under review, ZB’s expenses had been restricted to 19 percent below the level incurred during the same period in 2014, resulting in a saving of $5,5 million.

The group’s total revenue was down by an aggregate 2 percent, weighed down by a 35 percent reduction in revenue from lending activities. This was offset by improved outturn in reinsurance operations, life assurance operations and commissions and other income which performed better by 36 percent, 20 percent and 7 percent, respectively in comparison to the prior comparable period.

The $2,2 million reduction in income from lending activities was realised after prudential interest reservation of an amount of $9,9 million which would otherwise have formed part of revenue, reported the group. ZBFH maintained a conservative Loans to Deposits Ratio of 59 percent.

The group says it expects the setting up of a reinsurance business in Mozambique will be completed soon. “Our papers are currently with the Mozambique regulator who have since engaged IPEC, and we have been advised that we should be starting some of the work soon,” he said. He added that the group will continue to actively seek out more opportunities in the region.

On property development, ZBFH said’ “This remains the primary focus of the group, companies are experiencing difficulties so we are shifting our business more to . . . property development . . . and we are looking to expand our land bank.