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'Demand for local currency working capital swelling'

by Staff reporter
27 Aug 2021 at 05:32hrs | Views
STANBIC Bank Zimbabwe says its operations have remained resilient to macro-economic challenges bedevilling the country having posted an inflation adjusted profit after tax of ZW$1,2 billion for the half-year to June 2021. With demand for local currency funding continuing on an upward trend during the period, working capital requirements are swelling, said Stanbic.

This saw the bank's net lending book increasing in real terms from ZW$10,7 billion as at the end of December 2020 to ZW$12,2 billion as at the end of June 2021. The Standard bank group subsidiary recorded a 218 percent growth in net interest income, closing the period at ZW$2,6 billion and surpassing the income of ZW$803 million for the prior period.

"The uplift in interest income was largely buttressed by the strong growth in interest earning assets during the period as new lending assets were written," the bank's chief executive, Mr Solomon Nyanhongo, said while giving a business performance overview for the six months to June.

"Fee and commission income for the period had grown by 167 percent from ZW$1 billion in 2020 to ZW$2,7 billion, largely spurred by the improved volumes of transactions, which were being processed on our service channels after the two-month lockdown period (January and February 2021), as most businesses were operational again."

The Standard Bank Group subsidiary has sustained its impressive performance, which has defied the prevailing economic conditions to rebound from a loss position in the half-year in 2019 to a profit position in 2020 in the comparable period. One year down the line, the financial services provider has consolidated its steady performance although the ZW$1,2 billion was slightly below the ZWL1,3 billion inflation adjusted profit achieved in the prior comparable period last year.

In a statement accompanying the financial results for the period, Stanbic chairman, Mr Gregory Sebborn, attributed the slight drop in profit to depressed performance of the trading revenue line owing to subdued trading activity during the interim period. Mr Sebborn said the foreign currency shortages in the market combined with periods of lockdown also contributed to the marginal reduction in profit for the group's subsidiary.

"In addition, operating expenses increased in comparison to the prior year driven by expenditure of ZW$430 million in the staff optimization exercise," he said.

Stanbic Bank ended the six months period to June 2021 with a qualifying core capital of ZW$5,7 billion, outpacing the local currency equivalent of the required US$30 million regulatory minimum core capital to be achieved by Tier 1 banks by 31 December 2021.

Stanbic's positive performance comes at a time when the economy is still stifled by a number of challenges, chief among them being the resurgence in Covid-19 cases, high inflation, foreign currency shortages, low disposable incomes and erratic energy supply.

"The policy environment and fiscal space are likely to remain constrained to contain these challenges in the short to medium term outlook," said Mr Sebborn.

The bank's credit impairments ended in a net release of ZW$105 million, improving from a prior period charge of ZW$797 million, largely reinforced by better recoveries on foreign currency denominated financial assets.

Mr Nyanhongo said Stanbic embarked on a staff optimisation exercise during the first-half of the year, which led to the increase in its total operating expenses from ZW$2,7 billion in the comparative period to ZW$3,2 billion.

"This was on the back of progress in the bank's digitisation strategy, which saw an expansion in the digital solutions available for our transacting customers," he said.

Source - the herald