Zimbabwe | ZSE

The operating environment proved largely turbulent from a mix of the unstable exchange rate in the first half of the financial year and Covid-induced restrictions to FY20, affecting business operations. Despite these impediments, net interest income registered a 665% growth y/y from ZWL$53.66mn to ZWL$410mn, outperforming 348.49% annual inflation. The bank continued its aggressive drive to leverage on digitization of its services with fees and commission income increasing 835% y/y to ZWL$815.54mn from ZWL$87.24mn. Resultantly, the Group recorded a 499% y/y growth in revenue to ZWL$1.44bn in FY20 from ZWL$250.77mn in FY19 bolstered by strong performance in the digital banking platforms. Fair value adjustments on investment properties of ZWL$1.23bn drove operating income to ZWL$2.67bn up 498% y/y from ZWL$447.39mn in the comparable period.

Demand in the first halfof FY20was dampened by restrictions on store operating hours given COVID-19 as well as inflation driven price increments. The supply side was hampered by forex shortages that impacted the group’s ability to source inputs, COVID-19 induced restrictions also disrupted transportation of product. The operating environment improved going into the second half as the lockdown was eased and the auction system paved the way for a more stable local currency...

Month on month inflation spiked in January 2021, as expected, owing to beginning of the year price reviews. The remainder of the quarter saw month on month inflation rates taking a downward trend, registering lower rates than the previous quarter (4Q20). On the other hand, the local currency gradually increased the first half of 1Q and remained fairly constant for the rest of the quarter, on the back of an increase in money supply that took place in January and February. Consequently, parallel market premium increased between 4Q20 and 1Q21. On the Zimbabwe Stock Exchange (ZSE), the All Share Index has been on an upward trend, outperforming 4Q21 performance. ZSE Market Cap also increased in real terms although value traded seems to be weak over the period under review.

The company registered strong growth in revenue despite falling volumes as it continues to navigate its way through the tough economic landscape. BAT recorded revenue of ZWL$1.52bn for the year ended 31 December 2021 up 897% from the ZWL$152.76mn in the prior comparable period bolstered by inflationary increases in prices and export receipts from the revived cut-rag line. Overall volumes fell 12% from the previous period as the company experienced volume declines across all segments except for the company’s premium Brand Dunhill, which grew 1481% y/y from a low base effect.

The first half of the year proved a challenge to the sector at large on account of Covid-19 depressed economic activity and runaway inflation whilst yields remained negative in real terms, although up in nominal terms. The operating environment improved in the second half of the year on slowing inflation and relaxation of the restrictive lockdown measures. The Bank’s total deposits grew by 331% y/y driven by a 298% growth in local currency deposits to ZWL$4bn. First Capital Bank reported a 776% growth y/y in interest income from ZWL$74.64mn to ZWL$635.85mn. We estimate that yield in interest bearing assets lifted from circa 13% in FY20 to circa 24% in FY21 as cost of funding remained benign versus nominal interest rates. Notably, income from loans and receivables from banks and investment securities fell in real terms,contributing only 5.28% to the topline from 19.5% in the previous comparable period. The bank’s npl ratio trended below industry average at 0.16%. Interest expense grew 17.6% , however overall net interest income still grew695% y/y.

According to a recent statement released by the Monetary Policy Committee (MPC), annual inflation rate declined from 837.5% in July 2020 to 240% in March 2021 while monthly inflation fell from a peak of 35.53% in July 2020 to 2.26% in March 2021. The MPC affirmed its commitment to implementation of sound monetary policies in order to sustain the current disinflation trajectory and ensuring a conducive macroeconomic environment for investment and growth. Among the resolutions made to achieve the aforementioned goals is the maintenance of current conservative monetary targeting framework (targeting 22.5% quarterly reserve money). The MPC is also maintaining Bank Policy Rate and Mediumterm Bank Accommodation Facility rate at 40% and 30% respectively.