FINANCIAL services firm, Inter-Horizon Securities (IH) has projected a 406% rise in revenue at the Zimbabwe Stock Exchange-listed CBZ Holdings during the financial year 2022, underpinned by interest and non-funded incomes.
In an analysis of CBZ’s financial results for the half-year ended June 30, 2022, IH said revenue would rise to $200,24 billion during the full year to December 31, 2022, from $39,61 billion during the same period last year.
“The agricultural sector may remain of focus given the bank’s drive to support government initiatives in the sector,” IH said. “Of special concern lately is unpredictable weather patterns, perhaps explaining the growth in the bank’s provisions.”
With the recent upward review of the bank policy rate to 200%, IH said it expected upward adjustments in lending rates in the second half of the year leading to growth in interest income.
“Annual inflation is forecast to close the year at circa 393%, assuming the current trend in monthly inflation is sustained, meaning interest rates remain negative in real terms. A further driver for interest income will be growth in the foreign currency loan book,” IH said.
The central bank has also extended statutory reserve requirements to foreign currency deposits at rates of 5% for call deposits and 2,5% for time and savings deposits, promoting savings deposits which are necessary to support long-term productive lending in foreign currency.
“We, therefore, expect to see a less cautious approach to long-term lending in hard currency. The current stability in the local currency is fragile, any instability would see continued drastic revaluations in foreign currency assets and liabilities,” IH said.
The research firm said non-funded income would be driven by re-pricing to keep up with inflation trends.
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“Our valuation assumes a gradual normalising economy going forward. We expect a 58% increase in net interest income in FY22 (full year) compared to FY21 while non-funded income is expected to increase by 673%,” it said.
“Despite the bank’s improved systems that were to bring about a leaner cost structure, with cost correction, we anticipate operating expenses to increase by 179% driven by staff costs. We expect deposits and loans to grow at a rate of 227% and 451% respectively in FY22 largely due to the translation of foreign currency denominated deposits and loans.”
“We believe return on equity (ROE) will gradually moderate but will, however, continue to trend above pre-COVID-19 levels of 20%. The bank is currently trading under a cautionary with regards to the acquisition of First Mutual Life. The impact of the acquisition will be assessed once the transaction is finalised, and the results published. Although the banking sector is forecast to remain profitable to FY22, downside risk exists from the fluid monetary policy environment. We, therefore, forecast FY22 total income of $200,24 billion, up from $39,61 billion reported in FY21. We expect return on average equity (RoAE) to remain flat from 79% in FY21 to 78%.”
According to CBZ’s financial results for the half year to June 30, 2022, total income for the bank increased 710% year-on-year to $92,44 billion mainly driven by revaluations on investment properties which were up 9,503%.
Interest income went up 283% year-on-year from $3,76 billion to $14,39 billion on the back of interest rate re-pricing and a 90% increase in the loan book.
The agro business continued to make up 51% of the loan book while commercial loans made up 32%.
Of interest was the 25% growth in United States dollar-denominated loans and advances to customers suggesting a shift towards the foreign currency business.
The bank’s non-performing loan ratio was estimated at 0,7% against the banking industry average of 1,5% as of June 2022.
Non-funded income grew 751% year-on-year to $78,89 billion driven by fair value adjustments on investment property and unrealised foreign currency gains.
Operating costs were up 302% year-on-year primarily driven by staff costs (up 565%).
However, cost to income ratio moderated to 21% from the first half of 2021 position of 42%. The group registered a 887% year-on-year growth in PAT to $37,88 billion in the period under review.