ZB Financial Holdings Limited (ZBFH.zw) HY2019 Interim Report

We have extracted below the Chairman’s Statement from the 2019 half year interim report of ZB Financial Holdings Limited (ZBFH.zw), listed on the Zimbabwe Stock Exchange:

Performance background

Inflation, which became prominent in the last quarter of 2018, continued on an upward trend during the first half of 2019, closing the period on a year-on-year high of 175.66%. Structural disequilibrium persisted in the monetary sector with the shortage and sub-optimal distribution of both foreign currency and local notes continuing to slow down productivity in the business sector.

Government’s intervention through the introduction of an interbank floating exchange rate system resulted in a partial offset of the parallel market with the sustainability of the model being highly dependent on currency supply.

Against raging inflation, the Zimbabwe Stock Exchange (ZSE) capitalisation grew by 39.09% from ZW$19.42 billion at 31 December, 2018 to ZW$27.02 billion at 30 June, 2019 as investors hedged their investments.

The Group’s results are denominated in Zimbabwean dollars (ZW$) following the change in functional and reporting currency on 22 February 2019 as a consequence of Statutory Instruments 33 and 142 of 2019. Comparative figures which were previously denominated in United States dollars have been reckoned at par with the ZW$ in terms of the legal position existent then. The analysis below is therefore done in nominal terms.

Performance outturn:

The Group’s total income increased by 144% from $38.6m achieved for the half year ended 30 June 2018 to $94.2m for the six months up to 30 June 2019.

Net interest income from lending and trading activities of $14.3m up to 30 June 2019 was 40% better than $10.2m reported for the corresponding period in 2018. The increase was on the back of an expansion in the earning assets portfolio which grew by 57% over the six months from January to June 2019. This was also assisted by the re-pricing of loan assets in May 2019 following the removal of the regulatory rate ceiling which applied previously.

The increase in the net interest income is despite a 90% increase in interest expenses which was influenced by increased recourse to the wholesale market particularly during the first quarter of the year in response to increased volatility in the liquidity position as economic agents responded to policy developments affecting the monetary environment.

Moving in tandem with the increase in the loan book, a higher loan impairment charge, net of recoveries, at ZW$3.9m, was posted for the six months to 30 June 2019, compared to a net recovery of ZW$0.7m in the corresponding period in 2018. Net earnings from lending and trading activities thus decreased from ZW$10.9m for the six months to 30 June 2018 to $10.5m up to June 2019, representing a decline of 4%.

Gross insurance premiums increased by 28% from ZW$16.5m earned during the first half of 2018 to ZW$21.2m in the corresponding period in 2019. This growth represents a pattern of trailing replenishment of covers against the background of rampant inflation.

Despite a 22% increase in benefits, claims and related expenses, the aggregated insurance expenses ratio improved from 70% for the half year ended 30 June 2018 to 67% for the same period in 2019. Resultantly, the net business income from insurance operations increased by 44% from ZW$4.9m for the half year ended 30 June 2018 to ZW$7.0m for the same period in 2019. Banking commissions and fees at ZW$27.5m for the six months to June 2019 registered an increase of 39% when compared to $19.8m registered in June 2018. Commission and fee rates were adjusted during the second quarter of 2019 to keep track with general price movements.

A significant contribution to other operating income was reported in the form of exchange income, having arisen from the movement in the exchange rate which increased by 216% from the maiden rate of US$1:ZW$2.5 in February to US$1:ZW$7.895 at the end of June 2019. The total unrealised exchange gain as at 30 June 2019 amounted to ZW$29.4m.

The Group benefited from movements on the Zimbabwe Stock Exchange, recording a fair value gain of ZW$16.7m at the end of June 2019, a significant movement against a loss of ZW$0.1m in the corresponding period in 2018. Operating expenses increased by 75% to ZW$48.8m for the half year to 30 June 2019, from level of ZW$27.9m recorded in the corresponding period in 2018. The increase has largely trailed the inflation index and indicates the build-up of pent up cost expansion pressure going forward.

The Group posted profit after tax of ZW$43.4m for the half year ended 30 June 2019, was 364% higher than  the ZW$9.4m posted in the comparative half year in 2018.

The Group’s total assets grew from ZW$663.2m as at 31 December to ZW$1.1b as at 30 June 2019. Over and above the general inflation pull factor on monetary balances, total asset growth was also induced by the restatement of foreign denominated balances which were previously maintained at par with the Zimbabwean dollar.

The process of translating foreign balances upon change in the functional and reporting currency resulted in a  non-distributable reserve of ZW$110.0m being reported as part of the Group’s equity. Earning assets grew by 57% to close at ZW$709.1m as at 30 June 2019 compared to ZW$453.0m as at 31 December 2018.

The Group’s loan book grew by 120% from ZW$152.2m at 31 December 2018 to close at ZW$334.2m at 30 June 2019 as loan renewals by obligors came through at increased levels, whilst foreign denominated loans where translated at a higher rate at the end of the period. The non performing book for the Group at ZW$3.9m was 44% lower than ZW$7m as at 31 December 2018. The resultant non performing loans ratio for the half year ended 30 June was 1.2%, an improvement from 4.6% reported as at 31 December 2018.

Total deposits grew by 23% from ZW$433.0m as at 31 December, 2018 to close at ZW$533.8m as at 30 June, 2019.

Despite general liquidity pressure experienced during first quarter the Group was able to maintain an aggregate liquidity ratio above 80% throughout the period.

The Group’s total equity increased by 152% from ZW$120.4m as at 31 December, 2018 to close the period at ZW$303.2m at 30 June 2019, driven by the positive period performance as well as the impact of the functional currency translation reserve.

Performance outlook

Financial performance in the near term is highly susceptible to volatility in macro-economic factors, particularly general price trends, availability and pricing of foreign currency, and market liquidity conditions.

Business update

Portfolio expansion:
Following the establishment of the mono-currency monetary framework through S1 142 on 24 June 2019 the Group launched Syfrets Bureau De Change on 2 August, 2019. This has expanded the network through which clients and the general public are able to undertake foreign currency transactions. This service will also be offered through selected retail partners in order to facilitate the smooth execution of in-store transactions. Work towards the launch of a refreshed autonomous micro-finance banking operation is at an advanced stage following a tactical retreat that was necessary to re-evaluate the market.

Delivery channels:
In order to remain connected with its clients, the group will soon offer its banking services through the “WhatsApp” social media platform. This product is currently at pilot stage. Additionally, a new Customer Contact Centre is at an advanced stage and will be commissioned during the third quarter.

The Group is happy to report satisfactory progress in the re-establishment of international cards, having successfully run pilot tests with VISA.

Internal processes:
In response to the changing operating environment and attendant business threats, the Group has commissioned an Organisational Transformation Program which, inter-alia, seeks to re-evaluate the business model, processes and systems. An expected output of this exercise is an efficient business operation which leverages on technologies for cost efficiency and market penetration.


I would like to thank our valued customers for their continued patronage. I also thank staff and the management team for their commitment to the ZB brand. Lastly, I would like to thank the Board for its wise counsel.


R Mutandagayi
Group Chief Executive