Cavmont Capital Holdings sees improved performance despite negative earnings at Full-Year 2019
Banking, Cavmont

Cavmont Capital Holdings Zambia Plc has reported a set of results which show an improvement compared to the prior year with a significantly reduced loss before tax compared to the previous period, according to a statement from the Company.

The Group reported a loss before tax of K16.6m for the year ended 30 June 2019 compared to June 2018 where it had a loss of K50.3m”, read the statement issued by the Group’s Company Secretary, Rita Mapara Ndlovu, in their consolidated results for the year ended 30 June 2019, published on SENS on 26th September 2019.

Over the last 12 months, the bank has seen growth in its net interest income. “Net interest income for the year has grown by 32.9% from the prior year on the back of underlying credit growth on the balance sheet with gross loans and advances of K760m compared to K653m in the previous year”.

 

The bank chose prudence over volume when it came to asset growth in order to ensure they did not suffer from the scourge of non-performing loans that was rife in the banking section during the period under review. “Asset growth will be selective with a focus on quality assets to protect earnings from material impairment charges going forward”.

 

 

Increased bank account holder transaction frequency and depreciation of the Zambian kwacha also helped improve income. “Non-interest reported strong growth at 25.7% compared to the prior year mainly due to increased trading volumes and improved margins on foreign exchange transactions on the back of exchange rate volatility”.

 

The bank chose the side of caution in its application of accounting standards that dealt with the recognition of assets. Despite adopting the now widely used IFRS 9 (the International Financial Report Standard that addresses the account for financial instruments), which was the reason for ubiquitous impairments in the 2018 to 2019 period, the bank opted to retain its use of IAS39 in order to compare apples with apples.

 

However, the impact of the newly adopted accounting stand did have an impact on the bank’s asset growth. “Overall asset growth remained subdued at below 10% when the impact of IFRS 9 is taken into account”. Furthermore, the bank remains resolute despite this impacting the growth rate of its net loans and advances. “Despite the minimal growth in net loans and advances, which has been adversely impacted by IFRS 9, the Group remains committed to supporting our customers from all sectors of the economy through responsible and prudent lending”.

 

Another point for the bank’s optimism was on its funding side. “The Group recorded a 5.8% growth in its customer deposits for the year ended 30 June 2019 closing at K942.6m compared to K890.7m as at 30 June 2019”. Furthermore, the bank issued preference shares of K76 million allowing it to meet the minimum regulatory capital requirements for classification for tier 1 capital.

 

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