“Big Strong Reliable” ZANACO Bank Plc has been on a vanity trip over the last couple of quarters. The #Kula inspired bank has seen its image turnaround from the not so good looking cousin from the “east” to a world class image inspired outfit. Hence it comes as no surprise that at half year, there operating expenses are up by 15% largely attributed to investment related expenses. They have literally rebooted their goodwill.
According to SENS Announcement published on 28th September 2018, Non-funded income (NFI) grew by 24% Year-on-Year due to strong commission and foreign exchange income largely linked to the growth in the customer deposit base. The bank reported that deposits had grown by17% Year-on-Year, and transaction activity had in turn increased. Consequently, NFI has contributed 41% to total income compared to 33% in the prior year.
Asset performance on their half year unaudited financials reveals a reduction in cash and balances with the central bank by 22%. In addition, there was a reduction of loans and advances to customers by 5.2%. Conversely, there was a 30.7% increase in financial investments (available for sale) that overall lead to the increase in total assets.
On Investment income, the bank experienced growth of 56% Year-on-Year, reflecting a balance sheet growth achievement of 34% which was supported by strong and positive momentum on the customer funding side. The bank believes this significant achievement attests to the strength of the Banks network reach-out and enhanced value proposition. They possess one of the most expansive branch networks all thanks to legacy strategies.
However, the aforementioned achievements were negated by 10% decline in net interest income (NII) on a Year-on-Year basis mainly due to margin compression following reduced pricing on local currency loans, and increased interest costs on customer deposits. Despite lending in the market being relatively subdued, the Bank has been able to grow its gross loans by 9% Year-on-Year. This is significant considering the central bank lamenting on non-performing loans (NPL).
The bank attributes the apparent decline in the net loan book has been occasioned by the transitional impact of adopting International Financial Reporting Standard (IFRS) 9, as highlighted in the statement of changes in equity above.
At half year, Zanaco remains well capitalized above the minimum required ratio of 10%. However, equity eroded from 1,215 million at half year 2017 to 750 million at half year 2018. The Bank’s management team remains cognizant of apparent economic challenges (unstable currency, marginal rise in inflation, fiscal deficits), as well as significant market opportunities, and will therefore continue to cautiously pursue a customer centric strategy which delivers value to investors and other stakeholders alike. This is the epitome of the #Kula marketing slogan. The bank believes in its core value preposition of being Big Strong Reliable.