Post-dollarisation banking trends


In late 2010, 20 months into dollarisation, I wrote about the five Cs – competition, capital, cost-structure, creativity and the catch-up game.

In Configuring the Banking Sector for the Long Haul which was written for the Zimbabwe Independent’s 2010 Banks and Banking Survey, I argued that these five Cs would define and drive the banking sector’s long-term transformation.

You could say it was all about future trends. In the investment world, they say the trend is your friend, so this week, in recognition of the importance of understanding trends as a competitive tool, I review some of the key banking trends of the post-dollarisation world.

Evolving business models

There is no doubt dollarisation was the main driver of the evolvement of banking models in Zimbabwe — it changed the game and crystallised the cost structure of banks, setting the scene for intense competition for deposits, for instance.

This has seen a marked increase in the deployment of the agent banking model in an effort to trace and capture liquidity at source.

Tetrad Investment Bank and Kingdom Bank have been notably aggressive in this area, what with their armies of in-store attendants and streetwise community bankers!

The bloodied competitive environment in the core banking business of deposit mobilisation and lending has also led to diversification away from banking assets in an attempt to find what might loosely be called blue oceans.

In most cases, this diversification has tended to create banking conglomerates. CBZ Holdings for instance ,announced plans in mid-2011 to diversify its income streams through investments in mining and agriculture.

Trust Holdings Ltd has property, agricultural and insurance portfolios. TN Financial Holdings on the other hand diversified into furniture manufacturing in 2010 and recently announced plans to venture into the fast-moving consumer goods, fast-foods and livestock banking in addition to its existing portfolio of banking, asset management and medical insurance businesses.

FBC Holdings acquired Turnall Fibre Cement after SMM Holdings failed to repay an $8 million loan, resulting in FBC Bank taking over shareholding in several Turnall Holdings operating companies.

Though FBC disposed of stakes in Steelnet and General Belting, it decided to hold on to Turnall due to the synergies it has with FBC Building Society.

NMB Holdings has also been seeking aggressive business models, though of an organic rather than acquisitive nature. It already owns 25% of African Century Leasing and has been seeking to set up three more units namely advisory services, asset management and stockbroking.

ZBF Financial Holdings already operates a raft of strategic business units namely ZB Bank, ZB Building Society, ZB Life Assurance, ZB Reinsurance Company , ZB Asset Management and ZB Stockbroking.

Restructuring and re-aligning

Staff rationalisation exercises have been one of the biggest trends of the multi-currency regime.

Some of the financial institutions that embarked on retrenchment exercises are Barclays (206 employees at a cost of $6,5 million), RBZ ( 455 out of 1 948 workers) Agribank (116 at a cost of $1,7 million) FBCH (30% of staff shed at a cost of $3,5 million) MBCA Bank Ltd (38) Premier Banking Corporation now Ecobank (42) ZBFH (spent $667 000 at group level, of which the bank contributed $242 000) and NMB Bank (110 employees at a cost of $3,1 million).

In addition to staff rationalisation, banking groups have also embarked on rationalisation of another kind — streamlining of operations through disposal of non-core assets in order to raise cash.

BancABC for instance sold its stake in PG Industries while FBCH disposed of a 31% stake in Steelnet and a 19% stake in General Belting.

A contradictory element of the restructuring and re-alignment bandwagon has been in the area of branch rationalisation. While the likes of BancABC, Trust Bank, Royal Bank and TN Bank sought to enlarge their footprint, the likes of ZBFH, CBZ and Barclays Bank shrunk their branch networks.

In February 2011, ZBFH got regulatory approval to merge ZB Bank with ZB Building Society in order to cut costs and moved Building Society branches to bank branches.


Recapitalisation has no doubt been another notable trend of the dollarised operating environment, both as a regulatory imperative and as part of an evolutionary, survival-of-the fittest paradigm shift.

In fact it could be considered to be the most dominant theme of the banking sector in the past three years during which it became almost a refrain.

While the bigger banks met their minimum capital requirements largely from retained profits, others such as NMB Holdings, FBC Holdings, and TN Financial Holdings had to come to the market looking to raise capital.

FBC raised $8 million, NMB Bank $10,3 million, TN Holdings raised $1,2 million while Tetrad Holdings Ltd raised over $5 million in the first half of 2010 in order to recapitalise its operations.

Core banking system upgrades

For most banks, upgrading their core banking systems was a matter of playing catch-up as they had not had the opportunity to do so for a long time due to lack of financial capacity.

ICT upgrades, however, go beyond mere system integrity or satisfying licensing requirements — they have implications on capacity to deliver and flexibility to offer more products, which is why Temenos has been kept busy by local banks, quite a number of whom upgraded from various outdated versions of Globus to the T24 version.

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Omen N Muza writes in his personal capacity. He is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd, a Harare-based financial advisory company with interests in banking and agriculture as well as the convergence area between them.