Steward Bank targets top five spot

Published: 07 November 2013

STEWARD Bank has reported massive write downs in its operations, with swelling expenses and declining incomes during the half year to August 31, 2013 highlighting the challenge that its new owner, Econet Wireless Zimbabwe Limited, is facing. Steward is headed by South African banker, Kwanele Ngwenya.

The bank's financial results released last week were an epitome of the crisis roiling Zimbabwe's financial system, but they were also indicative of a tough period for the bank that was brought into the Econet family in January after completion of the acquisition of TN Bank.

Steward's deposits, interest income and profits were heavily knocked by a significant reduction in lending, market fatigue and increasing costs.

But chairman, Oluwatomisin Fashina, declared in a commentary last week that amid the turmoil, Steward would emerge as one of the top five banks in Zimbabwe within 36 months.

The overwhelming temptation would be to agree with Fashina, given the fact that the Econet family is no ordinary household.

It has massive financial resources backed by its hugely successful mobile telecoms business whose wide-ranging products the bank can easily leverage on.

Last week, Econet said in just over a decade, it has invested over $1,2 billion in Zimbabwe.

But in the meantime, the numbers are heading south, and this should be a strong source of anxiety for Ngwenya, who was plucked from Nedbank early this year to spearhead the rebirth of a financial institution that would give more bailouts to businesses.

Steward Bank took a $26 million hit on pre-tax profit to a $24,4 million loss during the review period, after notching $2,3 million in profit before tax during the prior comparative period in 2012.

The loss was driven by non-recurring expenditure as Ngwenya realigned the business model.

He had to deal with significant costs associated with nonperforming loans and advances, the closure of former TN Bank branches that were considered unimportant and rebranding the bank into an outfit that easily takes on the big four.

Impairment losses on loans and advances chewed a massive $9,4 million during the period, after eating $624 000 a year ago.

Ngwenya appeared to advocate cautious lending, which has caused ructions in government, which has blamed banks for plotting to sabotage the economy by suffocating industries.

Steward Bank's troubles have also been triggered by a government-sponsored interest rate cap that has inflicted similar damage to other financial institutions.

But his cautious lending, justified given high levels of market delinquency, caused over 100 percent decline in net interest income to $2 million during the period, from $5,3 million at the same time last year, reflecting the intricacy of the task at hand.

Yet while Zimbabwe may be no right market to heavily lend at this time, where will the income come from?

"We are unrelenting in our quest to serve the previously neglected members of our community through innovative products," said Fashina.

"We are firmly aware of the bank's strategic fit within the Econet Group and the bank will accelerate the harnessing of the synergy spectrum, particularly with Ecocash. The bank will introduce a wide array of new products and channels in the last quarter of 2013…the first of these products, Ecocash Save, was launch on the 9th of October and the response has been overwhelming," Fashina noted.

- fingaz