Worst Part Over Says ZB After U.S.$21 Million Write Offs (allAfrica.com)

ZB Financial Holdings says that clean up measures implemented in the last financial year, which included massive write offs amounting to $21 mln, are already having an impact in the first quarter of this year.
Chief executive officer Ron Mutandagayi told analysts that earnings had grown 396% against comparative period for the two months to February while the group had managed to outperform all of its targets.
“We are currently operating 165% ahead of targets following last year’s restructuring while our cost to income ratio at 74% has come down from the high 90s. We are targeting 50% at F16,” said Mutandagayi.
The group’s net income fell 4% to $57.2 mln from $59.8 mln the previous year. The group recorded an operating profit of $2 mln at F15, an increase of 1 051% from the prior year. This is in spite of an increase of 344% in loan impairment charges to $7.7 mln. Recurring operating expenses were near flat at $56.96 mln from $57.78 mln last year while staff disengagement costs were at $12.77 mln resulting in a loss from discontinued operations of $1.2 mln.
Net interest margin was at 0.97% against 1.34% in 2013 while none interest income contributed 72% to income. Commission and fees were up 23% as a result of new banking accounts. Mutandagayi said new products including the ZETDC service contributed $1 mln in revenue.
Non-recurring costs saw the group record a net loss of $9.81 mln. “Front loaded restructuring costs and credit impairments resulted in a negative outturn. Restructuring costs resulted in a significant knock to the income statement of $13.97 mln.” He said the group expected savings of $7 mln from the initiatives.
On the balance sheet, the group had embarked on a clean-up resulting in loan write-offs amounting to $21 mln. Mutandagayi said reserves created through prudent provisioning and reservation of earnings were able to achieve these write downs.
“As a result, a cautious growth in the balance sheet was achieved while a portion of fixed assets has been used to mobilize funding on a structured basis.” 59% of total assets are non-income earning. The mortgage book grew 34%, aggregate advances increased 9% and deposits grew 12%.
On the ratios, non-interest income was at 79% from 67% due to the slowdown in the credit business. Cost to income was at 99% from 97% as a result of the austerity measures taken in F14. The NPL ratio was at 29% from 18% with a security cover of 127%. The loan loss coverage ratio was at 11% from 42%. The loan to deposit ratio was at 59% from 60% and the liquidity ratio at 38% and the cash cover at 34%.
In the insurance cluster, net underwriting results increased 7%. The re-insurance underwriting margin closed at 17% which Mutandagayi said was a comfortable level for sustained profits. Regional markets contributed 16% of the revenue. Mutandagayi said the group’s plans to set up a reinsurance office in Mozambique was in the final stages while other regional opportunities were under consideration.
He said overall, the outlook was bright. All channels in the banking unit were making a positive contribution to profits while a $4 mln investment had been made in front facing technologies in F14 with rollout expected from April 2015. The group would also strengthen in property development unit with various developments lined up for cites in different towns and cities. – Finx
Source: Business