Tadiwa Musiyiwa
HARARE – Agribank’s strategy to grow its loan book and export business helped it boost its earnings in the five months to May 31, 2021.
The group, which is finalising its rebranding to AFC Commercial Bank, recorded a net profit of $308 million, which Acting chief executive Elfas Chimbera said was way above budget.
In his AGM report released today, Chimbera said the positive performance was mainly driven by interest income due to a significant growth in the loan book.
In the period, gross loans and advances had doubled from the December 2020 position to $4.13 billion. This pushed up the loan to deposit ratio to 67.4% against a budget of 49.1% and compared to 31 December 2020 industry average of 39.5% as per RBZ Monetary Policy Statement of February 2021.
The agriculture book represented about 55% of the total book. The bank, in line with its strategy to grow the export book, had an export book of US$7.5 million compared to less than US$2 million as at December 2020.
“The outlook is promising. The current tobacco selling season is expected to grow the bank’s foreign currency business. Inflation is declining, and when sustained, will result in a more stable operating environment.”
The non performing loan (NPL) ratio was 0.85% as at 31 May 2021 due to growth in the loan book and recoveries initiatives. The industry average NPL ratio as at 31 December 2020 was 0.3% as per RBZ Monetary Policy Statement of February 2021.
The bank had also seen an increase in customer deposits of 29% from April 30, 2021 at $6.13 billion.
It closed the period with a liquidity ratio of 64%, which was well above the RBZ minimum liquidity requirement of 30%. The industry average liquidity ratio was 73.1% as at 31 December 2020, as per RBZ Monetary Policy Statement of February 2021. The improvement in liquidity is attributed to increased deposits, agro bills funding and capitalisation of the bank.
The bank had been appointed the Agricultural Marketing Authority financial advisor for Agro Bills and had managed to raise ZWL100 million in respect of the bills.
The bank also received $500 million under the RBZ facilities to fund winter wheat production ($300 million) and $200 million for the productive sector, primarily to fund other agricultural activities besides wheat planting.
The cost to income ratio for the year to date (including revaluation profits and losses) was 59% compared to a budget of 73% while the staff cost to income ratio for the year to date (including revaluation profits was 27% against budget of 36%.
Tier 1 capital closed 31 May 2021 at $922.97 million and total assets at $11.39 billion.
Chimbera said the new structure implies vast opportunities for business growth for the commercial bank as it will provide banking services to the AFC Holdings and its subsidiaries.
