NBS Bank Limited (NBS.mw) 2020 Abridged Report
The group reported a strong financial performance in the year 2020, with profit after tax rising by 58% to K7.050 billion from K4458 billion reported in 2019. Faced with the significant impact of Covid-19 on economic activity, the Bank focused on continuity of service excellence and maximizing efficiencies. This drive was facilitated by acceleration of digital transformation, Other reserves which has enhanced customer experience and streamlined internal processes.
Our balance sheet remains robust with our capital and liquidity positions improving in 2020; net loans and money market,investments rose by 53% and 27% to MK59 billion and MK105 billion respectively whilst customer deposits increased by 27% year on year to K154 billion. The tremendous growth in the year demonstrates that the Bank has remained resilient during such a challenging year and has emerged stronger.
Net interest income grew impressively by 34% because of the growth of the loan book and increased investment in money market investments.Non-interest income which is made up of transaction fees and forex trading income increased by 17% from prior year.The uptake of the Bank’s products on digital platforms improved as investments were made to increase network availability and reliability. The Bank also upgraded its internet banking platform and Mobile App offering to ensure improved service offering. Net impairment charges on loans and advances were K1.9 billion during the year and KO8 billion in 2019, reflecting the related growth in the loan book. Operating expenditure was up by 10% compared to the prior year. In part this was due to capacity upgrade of the infrastructure supporting the core banking system enabling it to handle the continued investment in digital channels, COVID 19 preventative safety measures and other investments in staff capacity building.
Operating Environment and Achievements
The year 2020 saw the Corona Virus (Covid 19) pandemic affect the local and global landscape in unprecedented ways. Malawi is under a state of National Disaster as declared by the State President. The Bank contributed towards the fight against Covid 19,both in its own capacity and through the Nico Group of Companies with donations of personal protective equipment and hospital equipment. The focus and commitment of our employees has been at the core of the Bank’s response to the significant challenges in 2020. In difficult circumstances, our teams ensured continuity of service during peak pandemic times.
The Bank continues to invest in its transformation and some initiatives include the introduction of biometrics as part of the identity verification process, The Bank has enhanced its partnership with the Directorate of Traffic and Road Safety Services through the introduction of road traffic payments on its EazyMobile 322 platform. The Bank also introduced international money remittance services across its branch network by collaborating with Hello Paisa and World Remit. To reinforce its drive towards financial inclusion, the Bank through its agency banking arm Bank Pafupi, and its ongoing partnership with Financial Access for Rural Markets, Smallholders and Enterprises (FARMSE) prioritised a plan to increase visibility of the channel and educate local communities about the value of banking formally.
Lastly, noteworthy achievements for the Bank during the year were awards received for two consecutive years : as the Best Bank in Malawi at the Euromoney Awards for Excellence and Bank of the Year by The Banker. These awards serve to reaffirm the confidence that customers and shareholders have in their Bank and will aid to further motivate the NBS Bank plc Red Brigade to work even harder to bring better results, solutions, and all-round service to its customers.
The Bank continues to oversee the execution of its efforts in its transformation journey, and it is on track in the implementation of its five-year strategic plan to tum the organization around. The Bank has diligently and innovatively sought to provide a best-on-the market digital banking experience to its clients via its multiple outstanding channels and delivery of personalized customer experience by its agile members of staff.
The economic outlook is positive with Gross Domestic Product (GDP) for 2021 estimated to rebound to 6.1 percent from the 1.5 percent growth reported in 2020 based on Reserve Bank of Malawi annual report This is owing to the improving prospects following the administering of the Covid 19 vaccines which should enable the economy to transition back to pre-pandemic growth rates in the medium term. The overall annual average inflation was reported at 8.6 percent for 2020 being 80 basis points reduction from 9.4 percent recorded in 2019. Headline inflation is projected to average 7.8 percent in 2021 being even lower than it was recorded in 2020 owing to subdued pressures on food prices because of the favourable rainfall and government interventions in agriculture. The Malawi kwacha has recently depreciated against all major trading currencies, and this situation is likely to persist in 2021. The weakening of the kwacha is largely attributed to the dwindling supply of the foreign exchange on the market.
The policy rate was revised downwards by 150 basis points to 12 percent per annum in the final quarter of the reporting year and is likely to be revised downwards again in 2021. This along with reduced Interbank and Lombard rates will result in declining reference rates in the short to medium term.
The Board of Directors has recommended payment of a final dividend for the year ended 31 December 2020 of K 2.04 billion representing 70 tambala per share (2019: K1.019 billion representing 35 tambala per share). Interim dividend paid for 2020 was K1.310 billion representing 45 tambala per share (2019: nil). Total dividend for the year ended 31 December 2020 will therefore be K 3.35 billion representing 115 tambala per share (2019: K1.019 billion representing 35 tambala per share).
V.Kumwenda M.Mtumbuka K.Ngwenya