NMB Bank Zimbabwe Limited (NMB) was left counting heavy losses from the currency transition executed earlier this year after conversions from the Zimbabwe dollar (ZWL) to the Zimbabwe Gold currency (ZWG) resulted in the devaluation of some of its assets.
Subsequently, the financial services firm reported a ZWG362,22 million monetary loss for the six months ended June 30, 2024, up 2,604 percent from ZWG13,39 million in the same period last year, “primarily due to the transition from the hyperinflationary ZWL to the new ZWG currency.”
Zimbabwe’s economy struggled with high inflation and local currency instability at the start of the year leading to the introduction of the new currency, the ZWG on April 5, 2024.
As part of this process, NMB had to convert its previous ZWL-denominated assets using a conversion rate of ZWG 1: ZWL 2498.7242, as set by the central bank. This conversion led to immediate devaluation of ZWL-denominated assets, magnifying the bank’s monetary losses.
NMB Bank’s operating income decreased by nearly 40 percent. Fees and commission income stayed flat, but net interest income fell 41 percent, from ZWG126 million to ZWG74 million.
“The restatement of the group’s comparative balances as per IAS 29 before conversion to ZWG at a significantly higher index than the movement in the exchange rate resulted in a higher monetary loss than the comparative period,” NMB said in a statement accompanying the results.
This recalibration, alongside volatile currency exchange rates and a challenging economic environment, caused a significant reduction in profit compared to the prior year.
As for the financials, NMB’s profit after tax plummeted by 90,9 percent to ZWG71,5 million in H1 2024 from ZWG784,03 million in H1 2023.
This was attributed to a ZWG362 million monetary loss incurred due to the restatement of ZWL-denominated assets under the IAS 29 accounting guidelines. This major reduction in profitability underscores the significant financial burden of Zimbabwe’s currency transition.
Despite implementing robust liquidity measures, including raising US$10 million from British International Investments, the bank faces the uphill task of rebuilding its profitability amidst a fragile economic recovery.
NMB Bank’s operating income decreased by nearly 40 percent. Fees and commission income stayed flat, but net interest income fell 41 percent, from ZWG126 million to ZWG74 million.
newsdesk@fingaz.co.zw