Stan­bic Zam­bia’s FY2017 Head­line Earn­ings slide by 15.3%

Zambian Business Times - - FINANCIAL MARKETS - Busi­ness Times Lead An­a­lyst

STAN­BIC BANK ZAMBIAs FY2017 head­line earn­ings slid by a mar­gin of 15.34% to ZMW219.658mil­lion ($USD22.41mil­lion) from ZMW259.48mil­lion FY2016 ac­cord­ing to Pru­den­tial Fi­nan­cial state­ments pub­lished in the press. Key driv­ers of this de­cline were a (147.9%) rise in credit im­pair­ments to ZMW77.5mil­lion, (7.64%) uptick in non-in­ter­est ex­penses, (5.4%) de­cline in for­eign ex­change in­come line and a (3.63%) widen­ing in in­ter­est ex­penses off­set­ting a (5.67%) in­crease in in­ter­est in­come and a 7.44% rise in non-in­ter­est in­come – NnII.

Rise in in­ter­est in­come from in­vest­ment in gov­ern­ment se­cu­ri­ties

A 191% rise in in­ter­est rate trad­ing in­come from se­cu­ri­ties to ZMW385mil­lion backed by 22.9% con­stric­tion in loans and ad­vances were con­trib­u­tors to the 5.67% rise in in­ter­est in­come. Gov­ern­ment se­cu­ri­ties – bills and bonds – priced off the Kwacha term struc­ture of in­ter­est rates yielded gains re­ported in the fi­nan­cials. The bank paid ZMW17.64mil­lion more in­ter­est on de­posits re­sult­ing in an over­all 3.63% rise in in­ter­est ex­pense re­flect­ing ex­pen­sive de­posits – an au­topsy of the 2016 liq­uid­ity crunch.

Fee in­come and com­mis­sions rises sig­nif­i­cantly as new core bank­ing sys­tem im­proves col­lec­tion ef­fi­ciency

Com­mis­sion and fee in­come rose sig­nif­i­cantly by a quan­tum of 18.78% to ZMW323.78mil­lion while for­eign ex­change rev­enues plus re­alised gains slowed 5.4% to ZMW229mil­lion. Fee and com­mis­sion in­come rally is a re­flec­tion of the bank’s core bank­ing sys­tem im­ple­mented in 2016 which helped with col­lec­tion ef­fi­ciency. De­spite the de­cline in forex trad­ing in­come Stan­bic still re­mains mar­ket leader in trea­sury in­come. All non-in­ter­est ex­pense lines climbed higher re­sult­ing in an above 7% widen­ing in NI ex­penses.

Credit im­pair­ments erode Q4 prof­itabil­ity

The bank took on ad­di­tional loan pro­vi­sions to­talling ZMW77.5mil­lion with 45.7% ( ZMW35.49mil­lion) in Q4: 2017. Quar­ter on quar­ter – QoQ earn­ings re­mark­ably have slid by ZMW53.49mil­lion to ZMW29.68mil­lion a de­cline driven by a steep im­pair­ment num­ber of ZMW35.49mil­lion ac­count­ing for close to half the bank’s an­nual pro­vi­sion base. The ZMW11.38bil­lion bal­ance sheet was able to gen­er­ate an an­nu­al­ized Re­turn on Eq­uity ( in­clu­sive of sub­or­di­nated debt) – ROE of 13.55% com­pared to 19% in 2016 fi­nan­cial year. De­spite the de­cline in head line earn­ings the bank still re­mains the big­gest fi­nan­cial in­sti­tu­tion by as­set size and takes third place in fi­nan­cial per­for­mance in a 20 com­mer­cial bank in­dus­try.

Bal­ance sheet growth was 12.9% to ZMW11.8bil­lion YoY from ZMW10.4bil­lion.

Bal­ance sheet growth was 12.9% to ZMW11.8bil­lion YoY from ZMW10.4bil­lion.

Mar­ket com­men­tary

“The bank in 2017 po­si­tioned it­self as a dig­i­tal bank with e-com­merce ini­tia­tives launched and has set up units that are self-ser­vice dig­i­tal in prime ar­eas such as shop­ping malls. Com­mit­ment to small and medium sized en­ter­prises – SMEs is ev­i­dent by the var­i­ous events it un­der­took to in­clude pro­mot­ing of women busi­ness lead­ers through the Anakadzi bank­ing prod­uct. The re­silience, the in­sti­tu­tion showed to the au­topsy of the 2016 power and liq­uid­ity cri­sis that drove cost of de­posits high is ev­i­dence of a ro­bust and well cap­i­talised en­tity. How­ever, the in­ter­est ex­pense line still re­flects ex­pen­sive de­posits in com­par­i­son to its peers. Cost to in­come ra­tio de­te­ri­o­rated to 73% com­pared to 63% the pre­vi­ous year. In a nut shell, the bank had a fairly good rev­enue run but was matched with a higher than usual ex­pen­di­ture side which when cou­pled with credit pro­vi­sions re­sulted in the bank giv­ing up its top slot to com­pe­ti­tion that saw it slide to 3rd place af­ter Bar­clays and Stan­dard Char­tered banks. The mar­ket awaits to see Leina Gabaraane’s strat­egy in 2018 es­pe­cially that he comes with a track record from Botswana af­ter hav­ing worked as Chief Ex­ec­u­tive of Stan­bic Botswana and Lib­erty Group. His­tor­i­cally – in a decade and half – we have seen an in­ter­est­ing pat­tern where Stan­bic al­ways rally’s to the top af­ter slid­ing to third place for as long as the mar­ket can re­mem­ber.”

Stan­bic Bank re­mained com­mit­ted to main­tain­ing its foot­print in min­ing, agri­cul­ture, con­struc­tion and the small to medium sized en­ter­prise sec­tors. Leina Gabaraane took charge of the bank as Chief Ex­ec­u­tive from Botswana around mid-Jan­uary 2018 af­ter Charles Mudiwa took up an ap­point­ment as Stan­bic Kenya’s Chief Ex­ec­u­tive to head the 7thlargest bank in a 44 com­mer­cial bank­ing in­dus­try.

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