Introduction:
The Group’s primary financial statements are adjusted for inflation in terms of International Accounting Standards (IAS 29) – Financial Reporting in Hyperinflationary Economies.
Historical cost financial statements have been issued for information purposes only.
Performance Outturn:
In 2020, the Group recorded a 9% decline in total income from ZW$3.656bn in 2019 to ZW$3.323bn. The revenue performance was mainly underpinned by an 87% decrease in fair value adjustments, from ZW$1.032bn in 2019 to ZW$0.136bn in 2020. Banking commissions and fees also fell in real terms by 8%, from ZW$1.242bn in 2019 to ZW$1.142bn in 2020, as inflation continued to outpace rate adjustments for commissions and fees.
Net interest income increased by 0.34%, from ZW$0.657bn in 2019 to ZW$0.660bn in 2020.
Loan impairment charges to the income statement decreased from ZW$0.339bn in 2019 to ZW$0.282bn in 2020. Overall credit quality continued to improve, with non-performing loans as a percentage of total loans reducing from 2% in 2019 to 0.7% in 2020.
Net insurance related earnings declined from ZW$0.4bn in 2019 to a loss of ZW$0.002bn in 2020. This was influenced by a 58% increase in insurance related expenses which grew faster than the growth in gross premiums. Gross premiums increased by 2% from ZW$1.128bn in 2019 to ZW$1.148bn in 2020, whilst the related expenses increased from ZW$0.728bn in 2019 to ZW$1.149bn in 2020.
Other income increased by 152%, from ZW$0.663bn in 2019 to ZW$1.669bn in 2020, mainly underpinned by exchange gains.
The subdued revenue performance in 2020 was mainly due to the combined effects of low-cost absorption as performance of most economic sectors receded. This was compounded by the freeze on banking fees by the authorities which was necessary to ameliorate the effects of COVID-19 on industry and the general public.
Operating costs increased by 25% from ZW$2.222bn in 2019 to ZW$2.789bn in 2020, largely influenced by a catch-up adjustment on the cost base in tandem with the inflation profile over the past 2 years.
The cost to income ratio rose from 61% in 2019 to 84% in 2020. The sustainability of the cost base against contracting income levels in real terms continues to be a matter of continued strategic importance for the Group.
Profit from ordinary activities declined by 63% from ZW$1.433bn in 2019 to ZW$0.534bn in 2020.
An increased transfer to the life fund of ZW$0.599bn, compared to ZW$0.093bn in 2019 was made on the back of strong performance of the underlying assets.
The Group earned ZW$1.405bn as its share of profits reported by its associate companies for 2020, compared to ZW$1.091bn in 2019. The share of profits from associates is largely driven by the revaluation of investment properties which constitute the bulk of the assets at a significant listed investee entity.
The Group posted a net profit after taxation of ZW$1.065bn in 2020, representing a 45% decline from the ZW$1.939bn attained in 2019.
Meanwhile, the Group’s total assets increased by 21% in real terms, from ZW$15.636bn as at 31 December 2019 to ZW$18.977bn as at 31 December 2020.
Deposits and other related funding account balances grew by 15%, from ZW$6.155bn as at 31 December 2019 to ZW$7.108bn as at 31 December 2020.
Earning assets increased by 25% from ZW$7.982bn as at 31 December 2019 to ZW$10bn as at 31 December 2020 whilst constituting 53% of total assets (51% as at 31 December 2019).
The Group maintained a comfortable liquidity margin of safety, with the ratio of liquid assets to customer deposits being above 79% throughout the year against a prescribed ratio of 30%.
The Group’s total equity increased by 22%, from ZW$6.575bn as at 31 December 2019 to ZW$8.038bn as at 31 December 2020, driven by the positive performance for the year as well as gains on the revaluation of properties and equipment.
Operations Review:
Banking Operations:
ZB Bank Limited posted a profit of ZW$0.633bn in 2020, as compared to ZW$0.819bn in 2019. The reduction in profitability was mainly as a result of an increase in operating expenses from ZW$1.632bn in 2019 to ZW$2.284bn in 2020.
The Bank’s total assets stood at ZW$12.434bn as at 31 December 2020, from ZW$10.244bn as at 31 December 2019.
ZB Building Society posted a loss of ZW$0.055bn for the year ended 31 December 2020, reducing from a profit of ZW$0.285bn in 2019. Its assets increased from ZW$1.043bn as at 31 December 2019 to close the year 2020 at ZW$1.119bn.
A review of the branch network was done in 2020 resulting in the merger of branches in Harare and Bulawayo into modernised facilities with improved ambience which also offer safe online self-help facilities.
During the year, the Group expanded its product portfolio by launching VISA and Kesto Diaspora Banking.
Insurance Operations:
ZB Reinsurance posted a profit of ZW$0.086bn in 2020 compared to ZW$0.113bn in 2019. Its total assets increased in real terms from ZW$0.678bn as at 31 December 2019 to close the year 2020 at ZW$0.839bn.
The company has maintained good relations with its cedants and retrocession partners.
ZB Life Assurance posted a profit of ZW$0.135bn in 2020, compared to ZW$0.650bn in 2019. Its total assets increased in real terms from ZW$2.418bn as at 31 December 2019 to ZW$3.257bn as at 31 December 2020.
Growth in life assurance premiums has slowed down significantly as household incomes are affected by
inflation.
The company has started offering funeral service facilities as an add-on to its bouquet of services in partnership with selected partners.
Other Strategic Operations:
Land bank acquisition was maintained as a focal strategy to preserve value against inflation.
The Group attained an operating licence for its micro-finance business on 3 December 2020, and the unit was launched virtually on 16 December 2020, initially operating from 2 branches in Harare.
Internal Processes:
During the year, the Group commenced the process of certification under the Sustainability Standards & Certification Initiative (SSCI) through the European Organisation for Sustainable Development (EOSD). Full certification is expected within 12 to 18 months. Satisfactory progress in this regard has been registered.
The Group initiated processes to refresh its banking system, as an integral component of a digitalisation thrust, which will have an impact on the business model and customer experience. This has become a strategic imperative to guarantee the long-term survival of the business in a fast-changing business environment.
Group Human Resources and Training:
Despite the operating environment becoming less competitive relative to other countries in the region and beyond, staff attrition in the Group continues to be within acceptable levels.
The Group staff complement as at 31 December 2020 was 967, with 655 being permanent employees whilst 312 members were employed on a fixed contract basis.
A total of 1,423 attendances were recorded at 115 training courses held in 2020. All staff members attended wellness clinics and soft skills training during the year.
Industrial relations remained cordial during the year under review.
Appreciation:
I extend gratitude to our valued customers for their support during a very challenging period.
I also thank staff and the management team for their contribution to the profitable outturn in 2020.
Finally, I would like to thank the Board for its wise counsel.
Fanuel Kapanje
Acting Group Chief Executive
