Is it business unusual for ZB?

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ZB FINANCIAL Holdings’ (ZB) profits have lately come from untraditional channels as earnings from custom sources have been falling, the company’s latest financial statements show.
This comes as an unstable monetary environment characterised by currency risk and inflation has put the local financial system out of whack.
The financial group’s net incomes from lending activities were up by 39 percent despite a one percent decrease in its interest income and a seven percent shrinkage of its loan book.
Apart from an enhanced recovery of non-performing loans (NPLs), it attributed the unusual trend to the reprising imbalances between its assets and its liabilities.
“Despite a one percent reduction in interest income from $13,3 million to $13,2 million, net interest income increased by 12 percent from $9,1 million to $10,2 million as interest paying liabilities re-priced faster than assets in an environment in which rates fell down,” Ronald Mutandagayi (inset), the group’s chief executive said.
The liquidity surplus conditions created by increases in money supply as well as low credit absorption have continued on the local market with the effect of keeping interest rates depressed. During the six months ended June 2018, these dynamics played in favour of the group.
Between January and May this year, money supply grew by about $700 million or 10 percent, from $7,8 billion to $8,6 billion. Last year money supply increased by about 40 percent from $5,7 billion in January to $8 billion in December.
These increases have been on the back of increased government borrowing which has been predominantly through Treasury Bills.
Meanwhile, adding to the group’s earnings from reprising imbalances and the recovery of NPLs, was an increase in non-interest income which was dominated by transactional fees. This comes as the shortage of cash on the market has resulted in a substantial shift of business from traditional banking channels to electronic platforms.
“The 14 percent increase in other income from $20,1 million for the half year ended June 30, 2017 to $22,9 million for the half year ended June 30, 2018 was largely driven by a 14 percent increase in banking customers as well as a general increase in the number of transactions, particularly through the electronic banking channels. Earnings from traditional channels have been sliding down,” Mutandagayi said.
Total income for the group increased by 12 percent from $34,5 million for the half year ended June 30, 2017 to $38,6 million ― translating to a 15 percent increase in profit after tax from $8,17 million to $9,35 million.
The group says it has continued to address governance related matters identified by the central bank in 2017. Following a corporate governance inspection on the company, the reserve bank had identified some maters of concern, including the composition of the board and a certain executive appointment.
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