Stanbic Bank has transcended the macroeconomic challenges bedeviling the country to post an inflation adjusted profit after tax of ZWL 1.2 billion for the half year to June 2021.
The Standard Bank Group subsidiary has sustained its impressive performance which has defied the prevailing economic conditions having rebounded from a loss position in the half year in 2019 to a profit position in 2020 in the comparable period.
One year down the line, the top-ranking financial services provider has consolidated that steady performance although the ZWL 1.2 billion was slightly below the ZWL1.3 billion inflation adjusted profit achieved in the prior comparable period last year.
In a statement accompanying the results, Stanbic’s Chairman, Gregory Sebborn, attributed the slight drop in profit to depressed performance of the trading revenue line owing to subdued trading activity during the interim period.
Sebborn said the foreign currency shortages in the market combined with periods of lockdown also contributed to the marginal reduction in profit for the Standard Bank Group subsidiary.
“In addition, operating expenses increased in comparison to the prior year driven by expenditure of ZWL 430 million in the staff optimization exercise,” said Sebborn.
Stanbic Bank ended the six months period to June 2021 with a qualifying core capital of ZWL5.7 billion, outpacing the local currency equivalent of the required US$30 million regulatory minimum core capital to be achieved by Tier 1 banks by 31 December 2021.
Stanbic’s stellar performance comes at a time when the economy is still stifled by a number of challenges, chief among them being the resurgence in COVID 19 cases, high inflation, foreign currency shortages, low disposable incomes and unstable energy supply.
“The policy environment and fiscal space are likely to remain constrained to contain these challenges in the short to medium term outlook,” said Sebborn.
Giving a business performance overview for the six months to June 2021, Stanbic Chief Executive (CE), Solomon Nyanhongo, said the institution recorded a 218% growth in its net interest income, closing the period at ZWL 2.6 billion and surpassing the income of ZWL 803 million for the prior period..
“The uplift in interest income was largely buttressed by the strong growth in interest earning assets during the period as new lending assets were written. Fee and commission income for the period had grown by 167% from ZWL 1 billion in 2020 to ZWL 2.7 billion, largely spurred by the improved volumes of transactions which were being processed on our service channels after the two month lockdown period (January and February 2021) as most businesses were operational again,” said Nyanhongo.
The Bank’s credit impairments ended in a net release of ZWL 105 million, improving from a prior period charge of ZWL797 million, largely reinforced by better recoveries on foreign currency denominated financial assets.
Nyanhongo said Stanbic embarked on a staff optimization exercise during the first half of the year which led to the increase in its total operating expenses from ZWL 2.7 billion in the comparative period to ZWL 3.2 billion.
“This was on the back of progress in the Bank’s digitization strategy which saw an expansion in the digital solutions available for our transacting customers,” said Nyanhongo.
He said the demand for local currency funding continued on an upward trend during the period as working capital requirements swelled. This saw the bank’s net lending book increasing in real terms from ZWL10.7 billion as at the end of December 2020 to ZWL12.2 billion as at the end of June 2021.
The year started on a distressing note as the second wave of the deadly COVID 19 pandemic led to a spike in the number of infections which led to the reinstatement of national lockdown periods for the first two months of the year.
Nyanhongo said the level of business was adversely affected as the country grappled to contain the spread of the disease the severity of which led to a third wave which in turn led to tighter lockdown conditions being introduced.
Sebborn said that despite the various challenges, there were notable developments in the period under review such as improved economic performance, an improvement in capacity utilisation from 36.4% to 47% in 2020, the slowing down of the inflation rate from 837% in July to 106% by June 2021,an improvement in the international commodity prices of the country’s major exports and improved diaspora remittances.
The International Monetary Fund (IMF) and World Bank reviewed the Gross Domestic Product (GDP) growth forecast for Zimbabwe to 6% and 3.9% respectively. The Bretton Woods institutions, however, warned that sustainability of the growth forecast is dependent on addressing other key operational challenges being faced by the productive sector.
According to the CZI Manufacturing Sector Report capacity utilisation is expected to further improve to 61% in 2021, albeit with a warning that the improvement is heavily dependent on foreign exchange supply, particularly after the tobacco selling season, and policy inconsistencies.
Sebborn said that notwithstanding the slowdown in inflation from 837% to 106%, the current levels hamper economic planning and growth, and policies are required to improve productivity and to foster price stability. Major inflation drivers include high money supply growth, rapid depreciation of the local currency (“ZWL”) especially on the alternative foreign currency markets and policy volatility which have eroded confidence in the ZWL,” said Sebborn.
Nyanhongo said Stanbic Bank continued with its Corporate Social Investment (CSI) programmes even in the challenging operating environment exacerbated by the prevalence of the menacing COVID-19 pandemic and lockdowns. Stanbic Bank donated state of the art operating theatre equipment to Sally Mugabe Hospital Maternity Wing valued at US$65 000 in addition to refurbishing the theatre area.
He paid special tribute to all the Stanbic members of staff for their continued hard work, diligence, commitment, resilience and relentless application and effort which have culminated in the achievement of the commendable results in the midst of increasing headwinds intensified by the resurgence of the pandemic in this half year.