NMBZ Holdings Limited (NMB.zw) HY2022 Interim Report
The year 2022 started off with a new Chief Executive Officer in place geared up to deliver on our strategy, anchored by our strong digital footprint. The Group has embarked on a new strategic thrust opening up new avenues for growth while strengthening the core business.
The ongoing geopolitical tension in Europe (Russia/Ukraine crisis) and the resurgence of the Covid 19 pandemic especially in Asia has seen the International Monetary Fund (IMF) revising global projections to 3.6%, down from an initial projection of 4.9%. In Sub-Saharan Africa, economic activity is projected at 3.8%, largely underpinned by higher commodity prices and the gradual opening of economies. However, the slowdown in economic activities in Asia and Europe will have a wide implication for emerging and developing economies.
While the negative effects of Covid 19 have been receding locally, the domestic economy showed signs of economic vulnerabilities as evidenced by price instability and exchange rate depreciation. Annual inflation as of June 2022 increased to 191.6% compared to 60.7% recorded in January while the local currency on the auction market depreciated by 217% to close the half year at ZWL366.2687/US$. The situation during the period under review was largely impacted by the geopolitical tension in Europe (Russia, Ukraine Crisis) and the spillovers were felt through oil, food, and energy price increases.
In response to the macroeconomic instability in the domestic economy, both monetary and fiscal authorities announced a raft of measures aimed at fostering price stability and promoting growth and these include
- Continuation of partial dollarization (multi-currency).
- Upward review of the policy rate to discourage speculative borrowing (80%-200%).
- Introduction of gold coins as an alternative store of value.
The impact of the above measures will be seen more fully in the second half of the year. Initial indications are that the gold coin has been well received in the market.
Notwithstanding the economic challenges experienced during the period under review, the economy recorded a 40.5% increase in foreign currency receipts to US$4.01 billion as of May 2022. Of the total foreign currency receipts received, mining accounted for 48% and diaspora remittances 16%.
The country has continued to witness hyperinflation and as such, in line with International Financial Reporting Standards, inflation adjusted financial statements have been presented.
The Group achieved operating income of ZWL10.4 billion, up from ZWL5.7 billion achieved in the comparative period. This was driven by a significant increase in interest income and continued growth in fees and commission income.
Total assets increased by 8.01% to close the period at ZWL69.41 billion largely responding to inflation and movements in the exchange rate. Loans and advances closed the period at ZWL22.83 billion, up 4.34% from December 2021 levels. The Group continues to take a measured approach to risk, as evidenced by the strong asset quality with an NPL ratio of 1.22% compared to 1.39% as at 31 December 2021. The net charge for expected credit losses was ZWL259 million for the period under review.
Deposits and other liabilities grew by 4.47% from December 2021 levels. This was largely reflecting the impact of the exchange rate depreciation on USD deposits.
Cost discipline remains a core focus for the Group in the wake of increased inflationary pressures.
Capital and leverage
The main subsidiary, NMB Bank limited remains well capitalized with a Tier 1 capital adequacy ratio of 22.28%. Risk weighted assets stood at ZW$58.26 billion, up 10.15% from December 2021 levels.
Drawdowns have started on the recently signed EIB EUR12.5 million line of credit. Armed with a strong deal pipeline, the Group will continue to engage with providers of funding to raise more lines of the credit.
The banking subsidiary, NMB Bank, has fully met the minimum regulatory capital requirement of an equivalent of USD30 million. Consequently, the Board has resolved to resume payment of dividends starting with an interim dividend of 45 cents per share payable in scrip or cash. A separate notice for dividend payment will be issued.
Mr. Charles Chikaura and Ms. Sabinah Chitewe retired as directors of the Company effective 24 June 2022. I thank them for their sterling work during their tenure. The two outgoing directors were ably replaced by Mrs. Emilia Chisango who was appointed to the Board on 26 May 2022 and Mr. Dzingira Matenga who was appointed to the Board on 19 July 2022. We look forward to their contribution.
Despite the economic challenges currently bedeviling the economy, the mining and construction industry continues to show signs of resilience and recovery. Mining and construction are projected to grow by 9.5% and 10.5% respectively on account of higher commodity prices and government infrastructure projects.
The Group is expecting to continue delivering strong performance in the second half of the year driven by utilization under the various USD credit line facilities.
MR. B. A. CHIKWANHA
26 August 2022
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