INFLATION-adjusted profit at financial services giant, Stanbic Bank, more than trebled to ZWL$744 billion for the year ended December 31, 2023 from the previous year, as demand for foreign currency- indexed loans maintained a positive trajectory.
In the comparable period, profit stood at ZWL$240 billion, according to chief executive officer Solomon Nyanhongo.
Inflation-adjusted net interest income closed the period at ZWL$429 billion, up 44% compared to the prior year.
“This growth was largely spurred by the increased demand for both foreign currency and local currency funding by customers,” Nyanhongo said in a commentary to financial statements for the review period.
“This in turn saw new lending assets in both foreign and local currency being written during the period. During the year 2023, demand for foreign currency loans was elevated supported by the continued migration of business operations from local to foreign currency.”
The bank registered a 171% growth in its inflation-adjusted fee and commission income, which ended the period at ZWL$471 billion up from ZWL$174 billion.
The growth in the bank’s inflation-adjusted fee and commission income was largely underpinned by the uplift in its foreign currency denominated commission.
“Increased volumes of foreign currency denominated transactions were processed on the bank’s various service channels during the year 2023 as business operations had shifted significantly from local to foreign currency owing to the rapid depreciation of the ZWL [Zimbabwe dollar] currency against the US$[United States dollar],” Nyanhongo said.
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“In addition, new customers were acquired during the period supported by an improvement in customer transactability as the usage of foreign currency in the market increased.
“A net release of ZWL$50 billion was recorded in expected credit loss allowance during the year, improving from a net raise of ZWL$55 billion.”
The release in expected credit loss allowances was largely driven by the improvement in the quality of the bank’s lending book following the February 2023 interest rate reduction to 150% from 200% per annum.
This saw some customers settling the previously reported loan arrears thereby contributing to a reduction in the value of stage two facilities on which lifetime impairments are recognised.
The bank’s total operating expenses of ZWL$590 billion grew by 157% and this was largely driven by the impact of the 810% depreciation of the local currency against the US$ on foreign currency denominated expenses which include information technology licence fees, group recharges, insurance, cash importation and repatriation costs, among others.
“In addition, the rise in prices of goods and services had an adverse impact on the bank’s operating expenses as suppliers continued to elevate their prices in line with exchange rate movements in order to minimise the impact of value erosion on their businesses,” Nyanhongo said.
The bank’s customer deposit base grew by 90% in real terms to ZWL$3,3 trillion largely boosted by growth in both foreign currency and local currency deposits as new customers were acquired combined with an increase in wallet share on existing customers.
The extensive depreciation of the local currency against the US$ led to the sharp increase in the local currency equivalence of foreign currency denominated deposits.
Stanbic chairperson Gregory Sebborn said the bank ended the year with a qualifying core capital of ZWL$912,8 billion, which is equivalent to US$149,5 million, against the regulatory minimum in the local currency equivalent of US$30 million.
The chairman noted that the evolving global geopolitical events significantly contribute to the volatility and uncertainty in the outlook period, through disruptions to value chains.
He said this requires policymakers and business players to remain focused on resolving gridlocks to international trade and capital flows. The prevailing hyperinflation is associated with high cost of borrowing, value erosion, exchange rate instability and increased levels of dollarisation.
“This requires businesses to remain focused on cost containment, value and capital preservation in the outlook period,” Sebborn said.
