eBusiness Weekly
Business Writer
Leading financial services provider, Stanbic Bank, has shrugged off the adverse effects of the Covid-19-induced lockdowns to post inflation adjusted profit after tax of $5.2 billion for the year ended 31 December 2021 – recording a 185 percent surge from $1.8 billion in the prior year.
The set of results by The Standard Bank Group of South Africa’s subsidiary also saw it achieve a profit of $7.4 billion under the historical cost accounts, outpacing the prior period’s $3.2 billion.
In a statement accompanying the results, Stanbic Bank chairman, Gregory Sebborn, said the bank ended the year with a core capital of $11.3 billion, up from $3.8 billion in 2020. This equates to US$103.7 million against the regulatory minimum of the local currency equivalent of US$30 million.
“The outlook remains somewhat uncertain due to currency instability, the Covid-19 pandemic and the growing inflationary pressures. However, the bank will continue to ensure that strategies are in place to mitigate the possible negative effects of these factors,” said Sebborn.
Stanbic Bank chief executive, Solomon Nyanhongo, said the year 2021 was a difficult one on account of the Covid-19 pandemic, which saw blanket lockdown conditions being introduced in the first two months of the year as the number of infections soared.
However, the subsequent mild relaxation of lockdown conditions contributed positively to the recovery of the economy as most businesses were now able to operate with minimal disruptions, as the country’s vaccination level improved.
Nyanhongo said this also contributed significantly to the bank’s positive performance, which saw the 2021 inflation adjusted net interest income surge by 206 percent from $2.7 billion in 2020 to $8.1 billion, largely underpinned by the improved growth in the bank’s average interest earning assets from $11.7 billion to $34.1 billion as new lending assets and financial investments were acquired. The Bank recorded a 72 percent increase in net fee and commission income, growing from $4.2 billion in 2020 to $7.3 billion.
“The relaxation of the lockdown conditions led to the uplift in the volumes of transactions, which were passing through our various service channels. However, the persistent foreign currency shortages on the foreign currency market impacted negatively on the level of trading activity resulting in depressed trading revenue,” said Nyanhongo.
The 2021 inflation adjusted credit impairments improved from $1.2 billion in the prior period to $320 million, largely supported by the strong recoveries that were recorded during the period on the bank’s financial assets.
Nyanhongo said Stanbic’s inflation adjusted operating expenses grew by 3 percent from $8.6 billion in 2020 to $8.9 billion. This growth was largely driven by the once off costs, which were incurred as the bank completed its staff optimisation project.
“This was compounded by the impact of exchange rate movements on our foreign denominated operating expenses which include, among others, licence fees, data lines, insurance and franchise fees. The bank’s customer deposit base grew on a historical cost basis from $35.5 billion in 2020 to $91.8 billion largely underpinned by the uplift in our foreign currency deposits combined with the increase in money supply,” said Nyanhongo.
Sebborn noted that the global economy continues to recover, despite the ongoing Covid-19 pandemic. The global economy is expected to grow by 4.9 percent in 2022 driven by an active vaccine policy and firming commodity prices.
He said the Zimbabwean economy is also positioned to benefit from the growing trade prospects arising from the positive global economic outlook. The Zimbabwean economy grew by an estimated 6 percent in 2021 buoyed by a good rainfall season that resulted in improved agricultural output.
The growth momentum is expected to progress into 2022, with forecasts ranging from 3 percent (IMF) to 5 percent (Government). Mining and agriculture are envisaged to be the key growth drivers during 2022.
“Notwithstanding the positive GDP outlook for 2022, we remain cautious of the following potential business risks: erratic rains which could reduce productivity for non-irrigated crops; The Covid-19 pandemic, especially given that the nation’s vaccination levels stand at below 25 percent of the population; Currency instability caused by excessive money creation but manifesting in hyperinflation and a dislocation between the foreign currency auction rate and parallel rates, as well as inefficiencies on the foreign currency auction system, leading to external payments backlogs; Longer power cuts due to frequent breakdowns at the thermal power plants.” Said Sebborn.
He noted that annual inflation, which had decelerated to 50.2 percent in August 2021, has been creeping upwards since then, reaching 60.7 percent by December 2021. The resurgence of inflationary pressures indicate that value and capital preservation will remain critical in the outlook period.
