The pan-African banker, African Banking Corporation Holdings (ABCH)’s solid performance over the years is being threatened and hampered by a significant rise in impairments of loans, the group’s latest financial results have shown.
Announced on Tuesday, the audited results for the period ending December 2013 shows that the group’s significant impairment were recorded in its Mozambique, Tanzania and Zimbabwe subsidiaries.
Figures show that BancABC Mozambique was affected by one large account which the group’s Chief Financial Officer, Beki Moyo says has been struggling to service its debts, “hence the need for impairment.”
Although the group’s impairments in Botswana and Zambia are reported to be within its target range, another subsidiary up north ÔÇô Zimbabwe ÔÇô continued to experience a negative impact as a result of tight market liquidity position.
“In Zimbabwe, the tight market, wide liquidity position continued to negatively impact borrowers’ ability to service their loans,” says Moyo.
A close look at the results shows that the group’s gross non-performing loans during the 12-month period increased to 9,8 percent from 9,2 percent while its net NPL ratio increased to 4,8 percent due to more aggressive impairment of non performing accounts in the current year.
At the same time, with the exception of BancABC Zimbabwe, all banking operations registered growth in non-interest income.
Moyo explained to financial journalists and analysts on Tuesday that Fees and commission in Zimbabwe was hampered by the memorandum of understanding between commercial banks and the Reserve Bank of Zimbabwe which were capped.
The group’s financials shows that its non-interest income was ahead by 25 percent to P692 million compared to the same period in 2012.
A breakdown of the group’s financials by respective subsidiaries shows that BancABC Botswana’s net profit after tax reached P153 million, reflecting a 62 percent growth (2012: BWP 94 million).
The upward trend has been attributed to an increase in net interest income as a result of higher margins recorded in consumer loans, which were of a significantly higher average level despite the total loan book only growing by 10 percent year-on-year.
Group Chief Executive, Douglas Munatsi, admitted on Tuesday that BancABC Tanzania continues to be a major challenge for the Group as two subsidiaries in that market recorded impairments of P135 million for the year under review.
As a result both operations recorded substantial losses for the period under review.
“An aggressive approach has been taken on impairments and recoveries will only be accounted for on receipt of cash. It is anticipated that it will take between 12 and 24 months to achieve the desired turnaround,” Munatsi said.
However another star performer is BancABC Zambia which posted attributable profit of P50 million, 39 percent up on P 36 million recorded in 2012. Business volumes in consumer loans as well as non-funded transactions were the major drivers of this performance.
Meanwhile, BancABC Zimbabwe’s attributable profit stood at P118 million from the P103 million recorded in 2012, despite profitability being adversely affected by high impairments, which increased to P92 million compared to P41 million in 2012. The impairments were a direct result of the liquidity situation in the country.
Looking forward, Mr Munatsi said, “The Group balance sheet remains strong and is well positioned for further growth in 2014.”
