Old Mutual Zimbabwe (Old Mutual) has reported that profit after tax tumbled 40% to $53,9 million in the first half of 2018 from $89,3 million in the comparable period last year mainly due to a decline in investment return on listed equities.
BY FIDELITY MHLANGA
Total group revenue also fell 23% to $290,6 million from $378,6 million during the period.
However, operating profit surged 27% to $34,3 million from $27 million, driven by growth in banking and asset management profits.
Notwithstanding the volatility experienced in investment returns, the strong growth in operating profits highlights the performance resilience of the core business operations of the diversified financial services, which offers investment, savings, insurance and banking solutions.
Operating profit by CABS, its banking subsidiary, increased by 13% to $47,7 from $42,2m in the first half of 2017.
The building society reported a 29% growth in loans and advances to $765.1 million driven by growth in mortgages, salary-based loans to individuals and loans to corporates. The banking business also recorded a net surplus growth of 25%, to $20,7 million from $16.6 million in the first half of 2017.
“This (net surplus growth) was mainly due to growth in net interest income on the back of growth in loans and advances and net non-interest income due to the continued use of card-based and electronic banking platforms as alternatives to cash,” the company’s chief executive officer Jonas Mushosho said during an analyst briefing on Tuesday.
The banking business recorded a net surplus growth of 25% to $20,7 million up from $16,6 million in the first half of 2017. The performance of the asset management business, driven by higher fees on the back of growth in funds under management.
Funds under management for the asset management business went up by 38% from $2,1 billion in the first half of 2017 to $2,9 billion as at June 30, 2018 largely due to growth in net client cash flows and fair value gains on listed equities.
“The decline in earnings by 40% is largely due to the impact of lower fair value gains on listed equities in the current period, particularly on the insurance businesses and the holding company,” Mushosho said.
Mushosho said in spite of recent volatility, the stock market would continue to offer a sustainable hedge against environmental risks such as inflation adding equities will provide growth prospects as the environment stabilises. The group’s total assets grew to $3,4 billion from $3,1 billion during the period under review.
During the same period, total liabilities grew to $2,8 billion from $2,5 billion.