By Admire Mavolwane
THE winds of change are evidently still blowing across the country. What started off as a breeze with the appointment of Dr Gideon Gono as the governor of the Reserve
Bank of Zimbabwe in December 2003, quickly turned into a typhoon in early 2004.
He really upset the apple cart, as he promised in his now famous “maiden” – a rather strange word – monetary policy statement that it was no longer going to be “business as usual”. The first high profile victim was the financial sector boat, which dramatically floundered in January 2004.
When all had been said and done, three classes emerged. A few that managed to swim to shore generally unaided emerged more reinvigorated; whilst others with the help of life jackets, availed them by the initiator of the storm and others interested parties, just managed to reach dry land. The latter group is still regaining its breath. The third category has now been amalgamated into Zimbabwe Allied Banking Group (ZABG).
The scars of the trials and tribulations of yesteryear are still visible in the recently released results. New kids on the block Premier Banking Corporation and ZABG, were the first to unveil their numbers, showing no respect for old-age protocols where the elders normally have the first crack at everything.
Premier’s financials were, at first glance, really fantastic with attributable earnings of $14,1 billion, reflecting a growth of 846% on the $1,5 billion recorded in the first six months of 2004.
The growth was obviously spurred on by a 1 598% growth in the balance sheet to $293 billion. However, the bank’s provisioning of $1,6 billion, or 3% out of advances of $56,2 billion, looks worryingly inadequate. Maybe that aggressive (or is it conservative?) provisioning is a reflection of the quality of the book.
ZABG’s bottom line of $15,1 billion reminded analysts of the last June interims from Trust Holdings Ltd (THL), which showed attributable earnings of a similar figure. Back then, in 2003, $15,1 billion was truly an awesome amount that left many dumbfounded.
However, balance sheet sizes are vastly different, with ZABG having assets of $654 billion whilst THL had just a third of that figure. This fact could be a clear indication of how things have changed in the financial sector. More assets do not necessarily mean more profits anymore. It can also be taken to mean that the previous THL management sweated balance sheet assets really well.
The big picture is not yet complete as Interfin and Agribank are yet to release their results but so far Renaissance Merchant Bank and Barclays, after discounting ZDB Financial Services, have enjoyed the distinction of being the underperformers in the sector. Barclays, with earnings of $142 billion, dismally failed to even match last year’s first half ($196 billion) notwithstanding the 125% growth in assets.
Similarly, many are really bewildered as to how a bank of Renaissance’s size and reputation managed to make a profit of a measly $1,4 billion in six months. Closer scrutiny shows that revenues remained at previous year’s levels, whilst expenses grew by almost two and a half times.
On the brighter side of the spectrum, MBCA is the torch-bearer thus far with a 128% growth in earnings to $69 billion. Stanchart, though not so impressive in earning terms ($280 billion), managed to grow the balance sheet by 206%, outpacing the annual inflation rate of 164%.
We shall not delve much into the actual results, but in the graph we show a graphical picture of who earned what in the first six months of 2004.
It was indeed a tough six months in the financial sector, notwithstanding the relative stability in terms of interest rates.
From what we have experienced in the second period so far, only the most nimble-footed are likely to make it past the line with respectable numbers come December 2005.
With the second half still so young, some are already showing signs of laboured breathing and fatigue. This is before the demanding home stretch that is the final quarter.
Last year, the period October to December would be one the likes of Kingdom and NMB would be only too keen to forget; CFX Bank also stumbled spectacularly just before finishing tape.
The gap between the “haves” and “have nots” continues to widen and will no doubt be much larger by the end of the year.
The bank that has successfully steered itself through all the chaos to emerge on the side of the “haves” is CBZ. Actually, it has even outshone some of the previous heavies like Barclays Bank.
MBCA Bank, a new player on the commercial banking scene, is obviously coming along strongly overtaking First Bank and perennial underperformer, Zimbank, in terms of profitability.
We close with the quote from Charles Darwin which seems particularly apt given the hard times that both the smaller and the former big institutions have fallen upon recently: “It has been a bitter mortification for me to digest the conclusion that the ‘race is for the strong’ and that I shall probably do little more but be content to admire the strides others made.”.