ZANACO – 2016 Half Year Review
Banking, ZANACO plc

In their summarized and unaudited results published for the period ended 30 June 2016, Zanaco faced a challenging first half of the year with net profit margin down from 19% a year ago to 14%. A positive though was the bank being well capitalized above the minimum ratio of 10% requirement.

Earnings and EBIT were down 15% and 13% respectively. However, comprehensive income for the same period rose by 11%. Accounts show the bank was able to grow its total assets by 14% while its cash stockpile at Bank of Zambia grew by 20%. Furthermore, deposits also grew by 12% signaling confidence by consumers in the bank.

A lower EPS may be a concern for shareholders at this point as it means reduced value, however, shareholder equity actually grew by 9% in this period (and we are only in the middle of the year). Operating cash flow is one area the bank may be focusing on as it tries to retain competitive advantage as the bank adjusts to the macro environment. Interest income can also help fuel value as loans to customers have increased by 17.4%. Other areas to look at will be the loans to assets ratio which only improved by 1% and return on total assets which marginally fell by 0.3%.

The bank remains steadfast on its transformation program. They indicate that they will be staying the course despite all the challenges. Tight liquidity remains the critical threat to the bank but they hope through their transformation they will be able to realize efficiencies that will see the bank through this period.

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