• Fri. Apr 19th, 2024

ANALYSIS| Rising Interest Rates Cause Concern as CBZ 9-Month Revenue Reaches ZWL$1.5 trillion


Nov 24, 2023
CBZ profit up 959.5% in Q1, to explore AI in serving customers. etimes.co.zw

By ETimes

  • Financial services giant CBZ Holdings reported a profit after tax of ZWL$636.6 billion for the 9 month period ended 30 September 2023 – a sizable 696% inflation adjusted rise from the 2022 comparative.
  • The performance prompted significant improvement in the groups profitability indicators, with Return on Assets rising to 21% from 8%, and Return on Equity rising to 80% from 22%.
  • The groups total revenues climbed 137% to ZWL$1.5 trillion, although the cost to income ratio declined to 27% from 32%.
  • Total Assets increased by 113% to ZWL$6.7 trillion and Total Equity increased by 171% to ZWL$1.4 trillion.
  • Total Loans and Advances increased by 57% to ZWL$1.7 trillion while Total Deposits increased by 113% to ZWL$4.8 trillion.
  • Looking ahead, the group highlighted the downside risks of further interest rate hikes abroad raising external borrowing costs, and the normal to below normal rainfall being forecasted for the upcoming agricultural season.

Commentary and Analysis

The relatively stable currency environment of Q3 saw a moderate recovery in the groups balance sheet, with total assets and deposits closing marginally higher, although still below their values at the end of Q1. On the sharp growth in the groups revenues and profits, technical gains arising from the groups real assets and USD balances are likely major contributing factors. Otherwise, the high interest rate environment and the sharp ZWL depreciation experienced earlier in the year are expected to translate to subdued income interest growth, in real terms. Similarly, the squeeze on ZWL liquidity and increased use of cash are likely slow down income from fees and transactions. Beyond that, the possibility of a weak agricultural season presents a real threat for the group, given the increasingly significant contribution of the Agro-Yield unit to the groups income. On a positive, the group’s Asset Management unit has been appointed the Fund Manager in the upcoming Revitus REIT – an ambitiuous project that aims to raise funds from investors to reinvigorate a number of CBD properties held under the property portfolio of the National Railways of Zimbabwe. Under a multi-phased development/rehabilitation programme, the REIT is projected to generate more than US$6 million per year in rentals at completion.

On the ZSE, since the start of 2023, the CBZ share has gained 1310% in nominal terms and 68% in implied USD terms. It is currently trading at a Price to Book Ratio of 0.7x.

By ETimes

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