Demystifying the Analysis of Zambian Banks Performance
Banking, Cavmont, Standchart

The Lusaka Securities Exchange has 4 listed banks on its books. The banks are Cavmont Bank, Standard Chartered, Invest Trust and ZANACO. TFHZPC takes special care when analyzing banks due to the complexities of how these firms create value. Unlike other premier companies that are in the business of creating products or dominating a value chain, banks in Zambia primarily create value through selling money.

According to Investopedia, the key financial ratios investors and market analysts specifically use to evaluate companies in the retail banking industry are net interest margin, the loan-to-assets ratio and the return-on-assets (ROA) ratio.

When it comes to product offering, banks offer a plethora that includes providing direct services such as checking accounts, savings accounts and investment accounts, along with loan services, to individual consumers. Each of the listed banks competes for customers in one form or another in these areas. Ultimately, the dominance of a bank is partially determined by each of the aforementioned ratios. When the quarterly reports are generated, managers from different banks often find themselves comparing each other in terms of their performance on growth of assets and the size of their loan books.

However, it is important to note that only the annual report can provide the inquisitive stakeholder with intricate details of the mechanics of how banks create value. Conversely, unlisted banks are only obliged to publish scaled down versions of the 3 important financial statements (income, balance sheet and cash flow). Therefore, without all the numbers, TFHZPC can only focus on the ratios that can be calculated from the information available. We hope to provide some interesting insight into the performance of all banks in Zambia. With the announcement made a few days ago regarding monetary policy rates from the central bank, we expect an exciting time ahead for all banks in Zambia.

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