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Enacy Mapakame Business Reporter

Banking group, ZB Financial Holdings is hopeful of meeting tier 1 bank capital requirements through merging two of its units – ZB Bank and ZB Building Society by year end.

Group company secretary Mr Tinashe Masiiwa indicated ZBFH was confident of meeting the tier 1 bank capital requirements for its banking operations as per the Reserve Bank of Zimbabwe (RBZ) requirements. 

The banking group is expected to meet a minimum capital requirement of US$30 million or the Zimbabwe dollar equivalent effective December 31, 2021.

The merger is expected to be completed before December 31, 2021.

In a trading update for the third quarter ended September 30, 2021, Mr Masiiwa said merging the two would ensure its commercial banking the bank reaches the minimum capital requirement by the December 31, 2021 deadline.

“The group remains confident of meeting tier 1 bank capital requirements for its banking operations, prescribed by the RBZ as the (Zimbabwe dollar) equivalent of US$30 million, effective from December 31, 2021.

“This will be enhanced by the merger of ZB Bank Limited and ZB Building Society which is underway,” he said in a trading update for the third quarter to September 30, 2021.

The group’s board approved the merger of the two units in 2014, but progress was delayed following a battle for control of the group between one of the major shareholders, Transnational Holdings Limited and the National Social Security Authority (NSSA).

According to the group, the merger will allow the two units to remove duplication of roles while allowing them to enjoy economies of scale that include managing the cost of doing business better.

During the third quarter, total income rose by a marginal 1 percent to $5,89 billion despite a reduction of 86 percent in foreign exchange income.

According to Mr Masiiwa, foreign exchange earnings dominated total income in 2020, driven by the wide movements in the official exchange rate as authorities attempted to stabilize the market.

“Normal business income has become more prominent in financial year 2021,” he said.

Net interest and trading income jumped 313 percent compared to the same period prior year on the back of an 89 percent increase in the loan books and trading assets.

An average interest margin of 30 percent was achieved for the quarter under review from 18 percent recorded during the same period last year. 

Figures from the group show banking commissions increased 130 percent against the background of a 16 percent increase in the number of accounts and higher levels of utilization of electronic banking channels.

Group’s gross insurance premiums rose 22 percent with the related insurance expenses reducing by 16 percent between the period.

Mr Masiiwa added that net insurance income increased overall by 37 percent reflecting the combined effect of increased businesses and further improvement in risk selection.

At $3,8 billion, operating expenses during the period increased by 90 percent from $2 billion as cumulative costs to income ratio improved by 6 percent during the quarter to 64 percent.

Said Mr Masiiwa: “The ratio is expected to exhibit fluctuations in the short term as catch up adjustments are applied to the cost base in line with the inflation levels.”  

Total assets were 24 percent above the comparable quarter in 2020 to $31,7 billion supported by a 64 percent increase in deposits and other funding accounts to $15,7 billion.