AGRIBANK is looking to whittle down the level of its non-performing loans to below 10 percent of the loan book by December this year, managing director Sam Malaba has said. A total of $17 million NPLs have already been offloaded to the Reserve Bank’s, Zimbabwe Asset Management Company, and another huge chunk could go the same way.“We are looking at further reducing non-performing loans from 17 percent to below 10 percent by December,” Mr Malaba said during the presentation of the bank’s financial results for the half year period to June 30, 2016.
He cited the significant reduction in the level of the bank’s NPL’s, from over 30 percent a year or two ago, to 17 percent at the moment, as one of the four reasons the group had a rebound from a $3,7 million after tax loss in the half year to June 2015, to a profit of $2,15 million in the interim to June 2016.
Other factors were the removal of the bank from the US Office of Foreign Assets Control (OFAC) sanctions list, business growth strategies, injection of $30 million fresh capital by Government and access to Afritrades facility, from which Agribank received $30 million, availed to Zimbabwe by Afreximbank.
Agribank said loans and advances totaled $117,5 million from $129,8 million in the comparative period last year, representing a reduction of 9 percent in funding to borrowers. According to the RBZ, NPLs have the effect of reducing credit to productive sectors of the economy as banks manage risk.
The bank said, going forward, it will target specific areas of funding support, including agriculture value chains and tighten credit support, with emphasis placed on need for collateral.
Its SPV, designed to take over secured NPLs from banks to clean up their balance sheets, has assumed more than $500 million NPLs thus far.
On the other hand, deposits grew by 19 percent to $75,5 million in the half year to June 2016 from $63,5 million in the same prior period.
The bank said net interest income increased 69 percent to $10 million, net interest expense fell 42 percent to $3,5 million, net fee and commission income grew 2 percent, which resulting in total income jumping 41 percent.
In other performance indicators the liquidity ratio, at 54 percent, compares favourably with the regulatory requirement of 30 percent, cost to income ratio came in at 77 percent, staff costs to income were 39 percent while staff costs to total costs were recorded at 48 percent.
Capital adequacy ratio at 28 percent is more than double the regulatory minimum of 12 while tier 1 capital at $33 million, is more than the RBZ June 2016 requirement of $25 million.
Mr Malaba said considerations are underway to seek further capitalisation to tier 1 bank level of $100 million, as regulatory minimum, to be able to offer the full range of banking and financial services and attract suitable lines of credit after lifting of OFAC sanctions.
Agribank said that it is awaiting completion of ongoing processes Government and the RBZ are pursuing, to clear arrears to global lenders, to conclude lines of credit agreements with a number of development finance providers keen to support local agriculture now that it has been taken off sanctions.