Offshore facilities drive CBZ loans up 20%

Published: 03 March 2014

CBZ Holdings recorded write off totalling $32 million for the year ended 31 December 2013 as the firm continues to mobilise long term funding, CEO John Mangudya told an analyst briefing yesterday.

The group's lines of credit grew to $289.6 million against $178.84 million posted in the prior period and Mangudya noted that in this economy there are "short term deposits which are demand in nature but the requirements by customers are long term deposits; and therefore we also need a long term line of credit or a designated line of credit for the purpose of financing those transactions."

"So these lines of credit will come in handy for the purpose of smoothening our finances and also for the purpose of meeting the customer's requirements.... Our wish is that whoever accesses these funds could pay back on time as required by the conditions," he added.

Under internationalisation initiatives he noted that CBZ entered into the bond markets with the successful $68 million ZERB Bond.

He added that "plans are underway to increase tenure and value of the bond to $200 million."

"We shall be renewing our bond in April…Those funds will be very important for this economy, for our customers and for industrial development. So we're quite happy about this thing," he said.

Furthermore he indicated that long term offshore $10 million debenture was raised in 2013 while the CBZ Global Fund which is an offshore investment fund will be launched in Mauritius to invest in the local money and capital markets.

During the period under review CBZH sought and secured partnership with Safari Quantum Investments who acquired 10% shareholding in the group.

CBZH FD Never Nyemudzo explained that the $32 million write offs were done in order to improve credit quality of held assets.

Giving the group performance highlights he noted that total income went up 4.4% to $150.5 million while underwriting income increased by 51.8% to $7.171 million.

"This is also complimented by the restricted growth in terms of operating expenditure due to positive impact of the group synergies. We just recording a modest 6.6% increase in costs from $83.29 million in 2012 to close at $88.81 million in the period under review," he added.

He further noted that charge for impairment increased by 321.8% to $19.44 million and as a result PAT went down 18.4% to $36.65 million in FY13.

Basics earnings per share dropped 14.75% to 6.3cents. Meanwhile, non-interest income to total income increased to 36.7% from 33.9% and cost to income ratio also went up to 59% from 57.8%.

Turning to the non-interest income composition, Nyemudzo indicated that there was not much of a change as commission and fee income closed at 66% from 68% of total income recorded last year.

Gains from foreign currency trading and positions marginally increased to 18% from 17% while fair value adjustments close at 4% from 6%.

Non-funded income contribution was on the rise, further enhancing earnings stability and income diversification.

"What has been driving this commendable performance; you will see that non-funded income was on the rise recording 13% from prior year due to volume rather than increase in charge.

"We've already alluded to the aspect that the MoU was very restrictive on what you could pass on to the customers," he noted.

Under the income mix for the year under review, Nyemudzo told analysts that net interest income contributed 63%, non-interest income 32% and underwriting income 5%.

Furthermore, he said the key performance drivers included the significant growth in net written premium in life business at 91%; efficiency in claims management as the loss ratio improved to 34% from 45.2% in short term insurance and non-funded income growth which was enhanced to 13% in 2013 compared to 2% in 2012.

On segmental contribution to group income, Nyemudzo noted that contribution of non-banking business rose to 7% from 5.2% towards the targeted 20%. Meanwhile, banking contributed 93% to total income in FY13 from 95% in FY12.

All the group's operating units are now profitable, according to Nyemudzo, and under the segmental contribution to group profitability, "contribution of non-banking business rose to 11.5% from 6%."

The group's staff costs increased by 9.1% to $48.9 million while administration expenses went down 0.4% to $32.3 million.

"We believe that as we continue to fully implement some of our ideas in terms of group synergies there is still a lot of opportunities to reduce on our operating expenditure," he added.

Total assets improved by 27.4% to $1.558bln total supported by total deposits which went up 29.3% to $1.332bln "which was way above the 7% market growth, a sure sign of the confidence that the market has got in the group."

"As we're presenting now, we've to announce that the deposits have since gone up from $1.332bln to $1.438bln as at last week," he told the analysts.

Giving the deposits sectoral analysis, services contributed 24% from 19%, individuals 5% from 12%, manufacturing 9% from 12%, financial organisations 36% from 27%, agriculture and mining remained stable at 3% and 1% respectively. Meanwhile, government's deposits went down to 2% from 10% in the prior period.

Commenting on the deposits composition, the FD told analysts that there is movement towards deposit stability as demand deposits contribution reduced from 49% to 40% while lines of credit improved to 22% from 17%.

He noted that total advances increased by 20.3% to $1.028bln while security value went up to $1.426bln from $1.150bln.

Provisions marginally went up to $35.9 million from $35.5 million and non-performing loans grew to $47 million versus $41.9 million in the comparative period.

Funds under management also recorded a 26.2% increase to $140.2 million and insurance assets went down 15.4% to $4 million.

The group's liquidity ratio went down to 32.3% from 33.1% against the local minimum of 30% while the loans to deposit ratio decreased to 77.2% from 82.8%.

"The group has strong capital base sitting at $152.2 million compared to the $25 million which is required by the central bank.

"It's also good to note that all the subsidiary units are also in compliance in terms of capital adequacy," he added.

CBZ Bank total income increased by 2.5% to $140.1 million while PAT went down 23.4% to $32.4 million. Total assets closed 22.6% firmer at $1.531bln and total deposits improved by 28.8% to $1.342bln.

CBZ Life recorded a 63.3% in underwriting income to $4.9 million while PAT went up 120% to $3.3 million. Meanwhile, CBZ Insurance's underwriting income increased by 27.8% to $2.3 million with a 100% increase in PAT at $0.4 million.

Total income for CBZ Asset Management went up 50% to $2.1 million while PAT closed 300% firmer at $0.4 million.

- zfn

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