Based on December 2022 financial results, Zimbabwean banks are trading at an average historical Price to Book ratio of 3.65x compared to regional peers trading at Price to Book ratio of 1.13x. This implies Zimbabwean banks have been trading at 223% premium compared to regional peers despite the former realizing negative real returns. Banks within the IH Universe (CBZ, FBC, FCB, and NMB) are currently trading at a weighted P/BK (+1) of 2.56x against regional peers trading at 1.14x. Based on this aggregate valuation, we recommend reducing exposure to Zimbabwean Banks at current levels.
The total number of banking institutions closed the year 2022 at 19, remaining unchanged compared to 2021. However, the number of operating building societies reduced from five to four following the merger between CBZ Bank and CBZ Building Society, effective 30 September 2022 and consequently the cancellation of the building society’s licence. On the other hand, the number of operating commercial banks increased to 14 from 13 recorded previous year, following the authorization of Time Bank to recommence operations after a pre-opening inspection by the Bank determined the institution’s readiness to conduct limited banking business effective 27 October 2022.
A total of three banking institutions were non-compliant with the new minimum capital requirements, and they are instituting various measures to bolster their capital position. All banking institutions were compliant with the minimum regulatory capital adequacy and tier 1 ratios. Aggregate core capital increased by 504.84% from ZW$101.04bn as at 31 December 2021 to ZW$611.11bn as at 31 December 2022. The growth was mainly attributed to retained earnings, constituting revaluation gains from investment properties and translation gains from foreign exchange-denominated assets. 800,000 In US dollar terms and using an effective exchange rate, aggregate core capital increased by 37% 700,000 from US$469.95mn to US$643.27mn.
