eBusiness Weekly
Nelson Gahadza
The increase in interest rates by the Reserve Bank of Zimbabwe (RBZ) will impact current facilities on Nedbank Zimbabwe’s loan book and will slow down lending, according to managing director Sibongile Moyo.
The RBZ hiked interest rates from 80 percent to 200 percent in a bid to block cheaper speculative borrowing which had adverse effects on exchange rates.
The developments came after investigations by the central bank’s Financial Intelligence Unit (FIU) revealed that some corporates were manipulating the loan system resulting in double dipping by getting multiple loans for similar purposes across various banks.
“We would have seen positive development on the more than doubling of interest rate. However, the big impact is to be in reduced credit uptake which means though our current books are repriced, we are not going to see as much growth in ZWL lending, which is why we have focused more on USD lending,” said Moyo.
She, however, noted that discouraging growth in inflation in the economy did not deter the Bank’s operations.
During an online media briefing, Moyo said the local Bank registered a good first-half performance despite the headwinds on several policy issues and constraints within the operating environment.
She said that the improved cliental transactional volumes in the Banking transaction space buoyed the bank’s performance.
“Most recently the improved interest rate resulted in increased net interest income and also given our investments in Treasury Bills.
“However, we are yet to see if the increased interest rate will improve credit quality and performance in the second half of the year,” she said.
Moyo said the two-week suspension on lending by the Reserve Bank of Zimbabwe (RBZ) sent shockwaves in the market, and the shareholders were concerned and this reduced momentum in lending.
She said that the bank will continue supporting sectors such as mining, manufacturing, primary agriculture, and green energy financing, and support while also looking at the sector’s supply chains.
Meanwhile, the parent company, Nedbank Group, says significant inflationary pressures in Zimbabwe resulted in increased net monetary loss by more than 100 percent to R277 million in the interim period to June 30, 2022 from R40 million loss in 2021.
Zimbabwe’s inflation rate jumped back into triple digits in May after the central bank effectively devalued the local currency by introducing a new interbank rate at which most commerce will take place.
The latest figures from the Zimbabwe National Statistics Agency showed that the country’s annual inflation rate reached 257 percent in July 2022.
Dr Terence Sibiya, the managing executive of Nedbank Africa Regions during an online media briefing said the increase in monetary loss contributed to a Headline Earning loss of R110 million for the group.
“The impact of hyperinflation means that we do post a net monetary loss which is significantly higher than the prior period. This means it has an overall negative impact on the group performance,” he said.
He noted that during the period under review, the Zimbabwean dollar depreciated against the US dollar by 332 percent and the SA rand by 276 percent, a R360 million foreign exchange gain on Nedbank Zimbabwe’s foreign currency holdings was recognised in net interest revenue.
Dr Sibiya said that management has put in place action plans to deal with Zimbabwe’s hyperinflationary environment and macroeconomic policy uncertainties.
Overall, the group delivered revenue growth of 11 percent to R30,5 billion,
while headline earnings increased by 27 percent to R6,7 billion. Return on equity (ROE) increased to 13,6 percent, up from 11,7 percent a year ago.
Headline earnings per share of R13,70 climbed 26 percent, and an interim dividend declaration of 783 cents per share was declared.
Dr Sibiya said that Nedbank Africa Region’s overall earnings grew by more than 100 percent to R574 million which is up from R182 million in the prior year last year.
He said the great result is mainly attributable to two key components which are an improved business in the SADC region, with Zimbabwe contributing extremely well.
On other hand, Dr Sibiya said Zimbabwe remains a key market despite immediate challenges such as inflation and runaways costs.
Dr Sibiya said Zimbabwe has made significant strides in the migration from traditional banking models to digital enabled ecosystems compared to other regional countries.
He said the bank’s digital journey still presents an opportunity to migrate customers from traditional banking to more digital-enabled platforms and have seen accounts growing in that regard.
“In the SADC region, we would like to keep on paying attention to the market as we see the transaction volumes continuing to grow,” said Dr Sibiya.
According to the group’s interim results for the six months ended June 2022, the group achieved a strong performance across all key metrics despite a difficult operating environment.
