A ‘new hope’ for Cavmont Capital at half year 2020
Banking, Cavmont

The in turnaround Cavmont Capital Holdings Zambia Plc has record better top half performance for the last six months of its current financial year compared to the previous one, according to a statement from the company.

Source: Bestofzambia website

Cavmont Capital Holdings Zambia Plc (“the Company”), with Cavmont Bank Limited (“the Bank”) as its wholly-owned subsidiary together referred to as (”the Group”), reported a set of results which showed improvement compared to the prior six month period before considering exceptional items with the loss before tax and exceptional items reducing from K24 million to K13 million year-on-year”, read a statement issued by Rita Mapara Ndhlovu on behalf of the Board on 26th March 2020 for the first six months of the 2020 financial year.

According to the statement, “Net interest income for the period has shown growth of 18% on account of reconstitution of the underlying loan book into higher-yielding portfolios during the period”. The loan book, like few other banks, had been plagued by non-performing loans. The bank signals continued resolution as this “growth has compensated for the drop in non-interest income over the period with an overall increase of 6% in operating income inclusive of impairment charges”.

However, with the depreciation of the local currency, the bank has suffered exchange losses. “The reduction in the non-interest income is on account of foreign exchange losses suffered during the period”. However, “the nature of the foreign exchange losses was of a one-off nature and is not expected to recur” signaling containment and hedging by the bank.

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As part of their turnaround strategy, the containment of operating costs has been high on the management team’s agenda. “Operating expenses have shown a decline of 8% from the prior year following a restructuring exercise carried out during the period leading to a decrease in staff levels and the closure and consolidation of some branches”.

Restructuring has had some far-reaching consequences albeit mostly being once off. “The exceptional items indicate the one-off cost of the internal restructure during the 6 months period under review”. Non-essential assets have been shed off which has resulted in job losses. “The restructure involved the closure of non-profitable branches and centralization of back-office operations which ultimately saw a reduction in staff numbers from 308 in June 2019 to 234 as at 31 December 2019”. The bank maintains that this is necessary and is “part of the turn-around process in order to reduce the operating cost base and put the Group on a path to sustained profitability”.

While the bank prides itself on maintaining an adequate capital ratio, the bank continues to be focused on its turnaround strategy. During this period though, “overall asset growth remains subdued at 5% on account of selective lending coupled with constrained liquidity conditions on the market”.

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The bank is focused on selective growth to improve the overall quality of the statement of financial position, while particular attention will be paid to operational efficiencies and recoveries and rehabilitation of nonperforming loans. Furthermore, they maintain a commitment to their customers as they transition to profitability. “The Group remains committed to supporting our customers from all sectors of the economy through responsible and prudent lending. On the funding side, the Group recorded a 3% growth in its customer deposits as at 31 December 2019”.

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