The 2020 operating environment was largely characterised by the unprecedented global challenges emanating from the novel COVID-19 pandemic. Global and regional economies have experienced significant challenges due to the COVID-19 virus and the Zimbabwean economy was no exception. The Government of Zimbabwe pronounced a number of socio-economic restrictions, effectively plunging the nation into lockdown conditions in an attempt to manage the spread of the virus as well as mitigate its ravaging effects, which was followed by subsequent pronouncements and measures to gradually alter and vary the lockdown conditions. A raft of policy pronouncements have also been made and these have all significantly impacted on the Group’s operating environment.
In spite of the difficult local operating environment and the unique global circumstances, the Group remained resilient and this culminated in the financial results which were underpinned by the Banking subsidiary’s digitalisation drive and fair value gains on the bank’s property portfolio. The Bank’s digital strategy could not have come at a better time as it has been quite pivotal in driving business within the COVID-19 induced circumstances. The Bank has recorded significant growth and expansion on its digital platforms and this has resulted in enhanced service delivery. Furthermore, in response to the prevailing hyperinflationary environment, the Group has adopted a number of value preservation strategies in order to ensure that shareholders’ value is not eroded.
On 11 October 2019, the Public Accountants and Auditors Board (PAAB) issued a pronouncement to the effect that the Zimbabwean economy had met all conditions necessary to be classified as a hyperinflationary economy. On that basis, the Directors have prepared the accompanying financial statements using the hyper-inflationary accounting basis to achieve fair presentation at the reporting date of 30 June 2020. The following results commentary is primarily on the Group’s hyperinflationary adjusted financial statements at the reporting date.
The profit before taxation was ZWL844 746 155 (June 2019 – ZWL852 273 012) during the period under review and this gave rise to total comprehensive income of ZWL992 251 893 (June 2019 – ZWL703 127 345). The Group achieved a basic earnings per share of 170.53 cents (June 2019 – 174.77 cents) and this translated into the headline losses per share of 1.28 cents (June 2019 – earnings per share of 35.82 cents). The significant difference between the basic and headline losses per share is largely due to investment properties fair value adjustments and gains arising from the translation of foreign currency balances due to the depreciation of the Zimbabwe dollar against the USD and other major currencies.
Total income amounted to ZWL1 248 545 848 and this was down 3% from ZWL1 291 433 954 recorded during the six months ended 30 June 2019 mainly due to a reduction in net interest income due to sub-optimal market interest rates.
Operating expenses amounted to ZWL327 844 569 and these were down 4% from ZWL341 124 089 recorded during the six months ended 30 June 2019. The reduced costs were a result of cost containment measures adopted by the Group in addition to improved efficiencies arising out of the Group’s digital drive.
The Group recorded an impairment credit loss on financial assets measured at amortised cost amounting to ZWL25 219 962 compared to an expected credit loss reversal of ZWL7 896 544 during the six months ended 30 June 2019 due to growth in the banking subsidiary’s financial assets.
The Bank has continued with its drive to reduce non-performing loans (NPLs) and this saw the NPL ratio reduce from 1.37% as at 31 December 2019 to 0.81% as at 30 June 2020. The drop in the NPL ratio is largely due to aggressive collections and stricter credit underwriting standards.
The Group’s total assets increased by 27% from ZWL5 473 819 939 as at 31 December 2019 to ZWL6 936 485 718 as at 30 June 2020 mainly due to a 47% increase in property and equipment, a 126% increase in investment properties and a 6% increase in cash and cash equivalents.
Investment properties increased from ZWL602 234 779 as at 31 December 2019 to ZWL1 363 353 363 as at 30 June 2020 whilst property and equipment increased from ZWL1 032 743 479 at 31 December 2019 to ZWL1 514 418 395 as at 30 June 2020 mainly due to the significant increase in property values in ZWL terms in line with market changes.
Gross loans and advances increased by 3% from ZWL1 396 704 117 as at 31 December 2019 to ZWL1 439 233 342 as at 30 June 2020 mainly due to a slowdown in advances during the period under review in view of the prevailing economic conditions.
Cash and cash equivalents increased from ZWL1 289 795 771 as at 31 December 2019 to ZWL1 369 056 048 at 30 June 2020 mainly due to the upward foreign exchange revaluation of the Group’s foreign denominated liquid assets.
Total deposits increased by 12% from ZWL3 120 529 011 at 31 December 2019 to ZWL3 493 310 688 as at 30 June 2020 as a result of deposit mobilization strategies and the translation of foreign denominated deposits to the local currency.
The Bank maintained a sound liquidity position with a liquidity ratio of 73.90% which was significantly above the statutory minimum of 30%.
The banking subsidiary maintained adequate capital levels to cover all risks as reflected by a capital adequacy ratio of 39.39% as at 30 June 2020 (31 December 2019 – 39.49%). The ratio was well above the regulatory minimum of 12%.
The Group’s shareholders’ funds and shareholders’ liabilities increased by 54% from ZWL1 854 516 185 as at 31 December 2019 to ZWL2 860 394 662 as at 30 June 2020 as a result of the current period’s total comprehensive income.
The Bank’s regulatory capital as at 30 June 2020 was ZWL1 466 396 127 and was above the minimum regulatory capital of ZWL25 million.
The Bank submitted its capitalisation plan to the RBZ in terms of the requirements for a Tier 1 bank to have a minimum Zimbabwe dollar equivalent of USD30 million by 31 December 2021. We await approval of our capitalisation plan by the RBZ.
The Board has resolved not to declare an interim dividend as the Group is firmly focused on achieving the revised minimum regulatory capital requirement of the ZWL equivalent of USD30 million for a Tier 1 Bank by 31 December 2021.
There were no changes to the Directorate during the period under review. The directors of both NMBZ Holdings Limited and NMB Bank Limited boards remain as follows: Mr Benedict A. Chikwanha (Board Chairman), Mr Benefit P. Washaya (Chief Executive Officer), Mr Benson Ndachena (Chief Finance Officer), Mr Charles Chikaura (Independent Non-Executive Director and Deputy Chairman), Mr James de la Fargue (Non-Executive Director), Ms Jean Maguranyanga (Independent Non-Executive Director), Mr Julius Tichelaar (Non Executive Director), Ms Sabinah Chitehwe (Independent Non-Executive Director), Ms Christine Glover (Non-Executive Director) and Mr Givemore Taputaira
(Independent Non-Executive Director).
As announced in the Group’s financial statements for the year ended 31 December 2019, we continue to closely monitor the developments in the economic and monetary landscape. On 22 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2019 which established an Interbank foreign exchange market to formalize the buying and selling of foreign currency through the Banks and Bureaux de change. To operationalize this, the RBZ denominated the existing RTGS balances as RTGS dollars and initial trades between the RTGS dollar and the US$ were pegged at USD/RTGS$1:2.5. On the same date, Statutory Instrument 33 (SI 33) of 2019 was also issued and it specified that all assets and liabilities that were in USD immediately before 22 February 2019 were deemed to have been valued in RTGS$ at a rate of USD/RTGS$1:1.
On 24 June 2019, through Statutory Instrument 142 (SI 142) of 2019, the Government of Zimbabwe discontinued the multicurrency regime which had been in place since February 2009 and also introduced the Zimbabwe Dollar (ZWL), which was designated as the country’s sole legal tender to be used for all local transactions and other purposes.
On 26 March 2020, the Reserve Bank of Zimbabwe in a press statement announced various interventions in response to the financial vulnerabilit