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NMB FY18 NPL ratio misses estimates, sources $15 mln facility from regional institution for exporters

Almot Maqolo

HARARE – Dual listed financial service group, NMBZ Holdings has reported a non-performing loans ratio of 7.43% that missed the bank’s estimates, citing a low demand for RTGS$ loans in the last quarter of 2018. However, the bank had hoped to have reduced it to 5% by end of last year.

In 2017, the bank’s NPL ratio stood at 7.98%. Despite missing estimates, NMBZ is poised to have reduced its NPL ratio to 5% by end of June this year on the back of increased recovery efforts.

“I think in terms of what has happened is that we expected our loan book to grow much faster but because of what then happened we got a situation in the last quarter of the year where the demand for RTGS loans was actually minimum because the people then I think were demanding US Dollars for payments,” NMBZ chief finance officer Benson Ndachena told this publication on the sidelines of the banks analyst briefing held in the recently.

The bank’s loan book increased 24.31% to $262.3 million from $211 million recorded in 2017.

“So the demand then sort of contracted in terms of RTGS$ loans, therefore the increase in terms of our loan book was subdued compared to what we had expected that’s why we could not meet the 5% by December 31, 2018. But there was also other accounts as well which we had to downgrade but we are positive that come year end those accounts will actually come out of NPL and then the NPL ratio will actually come down to 5%.”

The market NPL is actually still above the 5%, Ndachena said everyone is trying to work towards the 5% but I think it will take a bit of time for banks to get to the target. Chief executive Benefit Washaya emphasises that the bank will meet its set target because of “a very significant repayment we are expecting from a non-performer”. However, he declined to disclose much details.

Ndachena said the group is in the process of securing about a US$20 million facility for exporters. The bank is optimistic that the appetite will be there as it have a lot of exporters who are looking for US Dollar loans.

“It’s a US$20 million facility, which we are concluding now and we are targeting exporters because the moneys will be given to exporters because they will pay us in US Dollars so that we are able to repay those lines of credit. So the facility is imminent any time now and exporters can access that money once we have signed all the agreements,” Ndachena said.

He said the facility is from a regional institution without disclosing the name.

“But once we have finalise the agreement, I think you will get to know all the details and as of 2 – 3 months from now should be done. In fact the only outstanding walls, discussion is the issue – in terms of the interest rate where we are negotiating to have a reasonable interest rate of between 7-8% because that is the sort of money which exporters would want which is not very expensive in US Dollars.”

Previously, NMBZ sourced a US$15 million line of credit from 3 European Financial Institutions to support exporters. At first the draw down was lower than expected due to the need to match the facility with exporters. However, the draw down was completed last year.

Meanwhile, the group recorded an after tax profit of $21.3 million for the year ended December 31, 2018 compared to $10 million in 2017 backed by increased net interest income and fee and commission income.

Total comprehensive income doubled to $21.26 million from $10 million. Net operating income increased 100% to $65.87 million from $44.44 million previously.

Operating expenses rose 26% to $34.74 million from $27.57 million du to the effect of some capacity expansion costs and inflationary pressures. Impairment losses on loans and advances were up 4% due to IFRS 9 provisioning and the increase in the loan book.

Total assets increased 25% to $527.06 million from $422.56 million.

Liquidity ratio for the bank stood at 41.6% from 47.5%. Capital adequacy ratio declined 23.25% from 24.30%. The bank is now sitting on $434.95 million deposits, representing a 25% increase from $348.95 million reported in the previous period buoyed by aggressive deposits mobilization strategies.

The group undertook the construction of a new Head Office along Borrowdale Road in April 2018 and the building should be ready for occupation in the last quarter of 2019.

NMBZ declared a healthy dividend totaling $3.77 million for the period.

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