BY TATIRA ZWINOIRA
CBZ Holdings Limited (CHL) grew its total income by 43,6% to $83,4 million in the first four months of 2019, driven by strong income generation and diversification.
The improvement was from a total income of $58,1 million as at end of December 2018.
CHL, in its trading update for the first four months of the year released at its annual general meeting on Wednesday said the improved total income translated to a 14,2% reduction in the cost-to-income ratio to 45,5% from the 59,7% recorded as at the end of December 2018.
This indicates that CHL was able to register a profit due to managing its costs during the period under review.
“The cost-to-income ratio improved owing to a 43,6% revenue growth,” CHL said.
However, total expenditure rose 38,4% to $45,9 million from $33,1 million as at December 31, 2018.
CHL said the operating environment had been characterised by foreign currency shortages, constrained business growth and inflationary pressure.
Deposits over the period under review were marginally up 1,7% to $2,11 billion from $2,08 billion. In its financial report for 2018, CHL said an increase in retail deposits and a reduction in term deposits were driving overall deposits.
Net advances grew 8,1% to $526,3 million as at the end of April, from $487 million recorded at the end of December 2018. But, during the period, the loans-to-deposit ratio grew to
30,9% from December 2018, comparison of 29,5%.
This indicated the group was continuing with its strategy to reduce risk in lending, specifically to agriculture due to drought, while containing costs.
Internationally, an acceptable loan to deposit ratio is between 80% and 90% as a high ratio would mean “a bank may not have enough liquidity to cover any unforeseen fund requirements.
Conversely, if the ratio is too low, the bank may not be earning as much as it could be”, American financial literacy website, Investopedia, said.
As such, CHL’s non-performing-loans (NPL) ratio continued on a downward trend to 15,3% for the period under review, from 16,4% at the end of December 2018.
“NPLs continue to be the focal point for the group. The ultimate objective is to achieve single digit NPL figures,” CHL said.
CHL also recorded a near 51% increase to $16,6 billion in terms of the value of transactions in the period under review, down from $11 billion at the end of April 2018.
CHL’s liquidity ratio was 76,1%, an improvement of nearly 12 percentage points from December 2018’s figure of 64,3%. The regulatory ratio is 30%.
The improvement in deposits and profitability drove a 14,9% increase in total assets to $2,81 billion, down from $2,45 billion as at the end of last year.
“Total asset growth driven by growth in total deposits and profitability,” CHL said.
Funds under management grew 18,3% to $448,8 million at the end of the period under review from $379,3 million at the end of last year. This indicates that CHL’s market value of all its financial assets increased during the four month period.
Meanwhile, CHL managed to increase its insurance assets by 18,3% to $448,8 million at the end of April, from $379,3 million at the end of December 2018.
“Insurance assets increased due to growth in underwritten business, as a result of continuous product review and expansion of distribution channels,” CHL said.
Underwriting income grew 53% to $4,6 million as at the end of April, down from the $4,3 million registered at the end of December 2018.
CHL said increased market presence in the insurance sector had resulted in the increase of the underwriting income.
In terms of its strategic choices going forward, CHL is focused on digital platforms, pursuing structured trade finance solutions, creating and entering new markets, and innovation.