Source: CBZ rakes in US$138m in interest – The Zimbabwe Independent August 10, 2018
CBZ made US$138 million in interest income, but interest expenses amounting to US$76,5 million eroded the earnings, a survey shows.
Out of all 18 banks operating in the country, CBZ at 4,26% was among the entities with the highest cost of funds only faring better than Metbank (5,57%) and FBC (6,06%).
More than 70% of the bank’s total net revenue of US$101 million was generated from non-funded activities.
CBZ is considered the country’s biggest bank with an asset base of US$1,992 billion. Its size is also mirrored by the US$1,791 billion deposits it holds out of an industry total of US$8,6 billion.
The bank, however, fails to utilise its huge asset base as shown by its poor return on assets (ROA) of 1,3%.
In terms of asset utilisation, CBZ ranks only better than BancABC (1,1%) and National Building Society (NBS), which has a negative ROA of 1,2%, given that it is the newest entity that participated in the survey.
CBZ also has a relatively high cost to income ratio of 76%, which reflects a high degree of inefficiency on the bank’s part.
In the year to December 2017, CBZ recorded operating expenses of US$76,9 million.
Staff costs accounted for nearly 50% of the bank’s operating costs.
Of the banking sector’s total loans of US$3,454 billion as at December 31 2017, CBZ accounted for 23,5% at US$809 million, followed by CABS and Stanbic, which came in at a distant third with US$330 million. These top three banks accounted for 52,34% of the issued loans.
As a result of the bank’s high proportions of loans in issue, CBZ has the largest amount of NPLs at US$95 million, which is more than double that of CABS, the bank with second largest share of NPL’s at US$42 million.
The survey revealed that CBZ was the biggest lender to the government with US$928 million worth of commercial paper in the form of treasury bills or bonds, Stanchart comes second with US$271 million.
The instruments constitute a form of loan that is classified separately on the financial statements. Their yields are not usually that high owing to the secureness of the borrower.
When the funds that have been committed to government securities are expressed as a percentage of deposits, they come out at 52% after Steward which tops the rankings with 72%, followed by FBC BS at 57%.
The ratio reflects the level of risk that the bank is avoiding from the other borrowers on the market who might be considered more risky when compared to the state.
CBZ is, however, among banks with the highest interest-expense-to-interest-income ratios.
This ratio shows the extent of the margin between the cost of deposits and funds issued as loans or government security.
It could be equated to gross profit in other entities. The smaller the ratio the more profitable the bank is expected to be, or rather the more efficient it is in managing its deposits and loans.
Stanbic tops the rankings with 0,8%, followed by Stanchart 0,9%, Barclays 1,4%, and Steward bank rounds up the top four with a ratio of 1,8%. The tail end of the ranking sees Metbank coming last at 94,2%, and CBZ at 55,4%.
In the full year ending December 31, CBZ recorded profit after tax of US$25 million making it the third most profitable bank in the country after CABS (US$42 million) and Stanbic (US$28 million). — Staff Writer.