Investrust Bank Plc has continued its efforts to record positive trends in the overall performance despite still being in a loss making position. The Bank has managed to achieve their positive trends with the help of their 25 branches after closing 2 branches and 3 agencies across Zambia, offering a full range of banking services to all categories of customers, including retail (individuals, SMES), NGOS, parastatals, Government agencies and private corporate institutions across all economic sectors (Abridged Results, 2019). The Bank recorded a loss before tax of K58.05 million in 2018 (2017: loss before tax K51.35 million).
Loss after tax was K109.18 million during 2018 (2017: loss after tax K37.99 million), mainly due to the reversal of the previously recognized deferred tax asset in respect of carry forward tax losses amounting to K53 million; reduced lending and subdued profit from foreign exchange trading transactions. The Bank’s net interest income decreased by 19% to K39.5 million (2017: K48.9 million) owing to significant reduction in interest income on account of inhibited growth in the loan book and Government securities portfolio. The decrease in interest income was mitigated by a 51% decrease in interest expenses to K48.8 million (2017: K99.1 million) (Abridged Results, 2019).
The Bank was adversely affected by the directive issued by the Bank of Zambia on “Unwarranted bank charges”, Total transaction fee and commission income recorded a reduction of 7% during 2018 to K43 million (2017: K46 million). On a positive note, transaction fee and commission expenses reduced by 66% to K2.8 million (2017: K8.2 million), mainly as a result of a reduction in accessing funding from the Central Bank (Abridged Results, 2019). Moreover, as a result of implementation of the model-based approach of loan book review, arising from the adoption of IFRS 9, the bank’s loan impairments have recorded a significant improvement with the bank recording a write-back to income amounting to K12.5 million In 2018 and (2017: charge of K8.2 million).
The Bank’s total assets reduced by 30% as at 31 December 2018 mainly attributed to a decrease in year-end cash balances, government securities, loans and advances, deferred income tax assets and current income tax assets, and fixed assets. Total assets were recorded at K833 million (2017: K1.190 billion). The biggest impact on total assets’ reduction was on the loans and advances as a result of implementation of International Financial Reporting Standard (IFRS 9), wherein the bank booked an additional expected credit loss as a day 1 adjustment of K168 million through retained earnings (Abridged Results, 2019). Hence, the decline in total assets had a profound negative impact compared to the decrease in the liabilities which reduced by 7%. Customer deposits decreased by 8% to close at K937 million (2017: K1,015 million). As a result of the aforementioned factors, the bank’s shareholder equity was recorded at negative K200 million (2017: positive K77 million) (Abridged Results, 2019). In addition, the 3 major accounting adjustments passed, namely IFRS 9 day 1 adjustment, reversal of deferred tax asset and reversal of K100 million, funds earmarked for capital, to customer deposits from equity hence the Bank closed with a shortfall of K196 million in meeting its minimum regulatory capital of K104 million as at 31 December 2018. Since last year June 2018 the stock price for Investrust Bank on the LuSE dropped from K14 per share to K12 per share where it has maintained.
The Board will continue to support management in the execution of strategy and believes that the set objectives will be met as soon as the liquidity and capital issues are resolved in the quickest possible time, to protect and preserve the long-term interests of shareholders. For now the shareholders look forward to the 28th Annual General Meeting (AGM) of the members of Investrust Bank Plc that will be held at the Radisson Blu Hotel, Lusaka Zambia on Wednesday, 31st July 2019 commencing at 10:00 hours.
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