It’s always refreshing reading a board chairperson’s letter to shareholders in annual reports that speaks to the heart of what the firm tried to achieve in the year under review. Charity Lumpa’s 2017 letter to shareholders was no exception. Her letter touched on everything from operational efficiency to prudent risk management. It is clear from her letter that the bank’s strategic focus, through the implementation of the medium term plan (MTP 2020), the bank desires to set itself up as a leading transactional and digital bank by the year 2010.
Key to the success of implementing any new strategy is the buy-in of employees. Managing Director Henk Mulder believes that key to the bank becoming a top transactional and digital player has been the embracing of the new direction by his members of staff. He further believes that their new operating model has set a solid platform for them to deliver superior customer experience, whilst reducing costs and enhancing business growth.
The silver bullet in the bank delivering exceptional service has been technological developments around the Zanaco Mobile App. In addition, during the year they launched the upgraded Xapit USSD system which was aimed at enhancing the customer experience. This coupled with improved segmentation and refinement of product offering is seeing the bank enter territory that sets them at par with the big financial players in Zambia.
Their efforts can be seen in their 2017 financial performance. The bank recorded am 18.7% growth in revenue during the year. Value was created through a 26.5% growth in fees and commissions, and a 132% growth in investment income. Furthermore, just the rest of the bank herd, their investment securities (T-bills and bonds) balance grew by 302% funded by a 19% increase in customer deposits.
One of the ‘side effects’ of implementing a new strategy is the achievement of inadvertent effects on cost of sales. Through their new strategy, cost control is an area they are making huge strides with from the 5% increase that they recorded. This is significant considering national inflation was in the 6-7% range.
Sadly though, the loan book did not grow as much. As indicated in the second MPC announcement for 2018, non-performing loans continue to be the scourge that has plagued the banking sector. Impairment loss recognised on loans and advances was up 19%. BOZ’s continued easing of monetary policy is yet to bear fruit for “Big Strong Reliable“. Conversely, this is also an indicator that money is still fairly expensive.
For investors, they will be pleased with an improvement in their earnings per share into positive territory. EPS for the year was K0.079 compared to negative K0.043 in 2016. Shareholder equity increased by 17.5%. Their new strategy has also meant a significant investment in the purchase of property and equipment. Cash flows from investing activities indicate a 238% increase in net cash expensed for investing activities. Doubling their investment is a signal to competitors that they are investing in staying ahead of the pack.
Although, Henk Mulder is cautious on his optimism regarding improvements in the loan book, he is hoping continued positive strides in the economy will yield growth for the bank in 2018. With Kula as their mantra, he believes that the bank is well positioned to be a trusted partner for growth for the communities in which they service through the provision of support and capacity building in financial education, digital literacy, and educational scholarships for the under privileged.
