“We are very cognisant of the fact that future growth in capacity will come from credit lines. We concluded a US$10 million facility last year and we have drawn down US$5 million of that,” group CEO, James Mushore said recently.
Mushore said other lines of credit were presently at various stages of negotiations, adding that the group would this year be focusing on increasing volumes rather than margins.
A number of financial institutions are increasingly turning towards finding new lines of credit from the international market, as Zimbabwe’s economy continues to reel under the grip of a liquidity crunch.
NMBZ’s lines of credit as at December 31 2011 amounted to US$18,9 million.
Country risk issues relate to the uncertainty surrounding elections, indigenisation andthe absence of a lender of last resort, among others that pose as major obstacles to investment prospects.
The entry of African Century into the group in 2010 was anticipated to open doors to international capital after the international financial services group underwrote the group’s capital raising measure from existing shareholders.
African Century and NMBZ together operate the leasing business, African Century Limited.
Mushore said the leasing business contributed US$113 573 to the group’s bottom line, adding that credit lines for the unit were currently at various stages of negotiations. Significantly, the lease book closed the year 2011 at US$11,3 million.
The percentage contribution from the bank to group profitability is expected to decrease due to increased contribution from the leasing business and other new units to be introduced in future.
“In as far as performance is concerned, we are on target in terms of average return on equity as we were affected in 2010 by the retrenchment exercise,” said Mushore.
Return on equity went up to 22% in 2011 from 5% in 2010. It is projected to grow to 25% this year.
“This was achieved against the background of the absence of a lender of last resort, so liquidity had to be managed very tightly,” he said.
NMBZ managing director Benefit Washaya said the group’s cost to income ratio closed the year 2011 at 76% and the target for 2012 had been set at 74%.
The cost to income ratio is a useful measure of the rate at which a bank’s costs change compared to income.
“We would want to see that figure coming down and lines of credit would help in terms of beefing up the top line which in turn would reduce the ratio,” Washaya said.
In the financial year ended December 31 2011, NMBZ recorded a profit after tax of US$4,5 million, with the banking arm contributing 94% to the figure.