• Tue. Jul 16th, 2024

ANALYSIS| Forex Gains Drive CBZ Holdings to ZWL$543bln Profit After Tax in HY23


Oct 11, 2023
CBZ profit up 959.5% in Q1, to explore AI in serving customers. etimes.co.zw

By ETimes

Financial Performance Highlights

  •  ZSE listed financial services group CBZ Holdings announced a ZWL$543.9 billion profit after tax for its financial year ended 30 June 2023 – a 582% inflation adjusted rise from the 2022 comparative.
  • The performance was a driven by a 186% increase in Total Income to ZWL$1.3 trillion. The rise was supported by unrealized forex gains of ZWL$786 billion while net interest income rose by 53% to ZWL$154 billion, Fees and commissions increased by 60% to ZWL$86 billion and net insurance income fell by 36% to a loss of ZWL$14.2 billion.
  • The groups operations generated nearly ZWL$2 trillion in cash flows, which supported expenditures of ZWL$21 billion, and a net increase of nearly ZWL$2 trillion in the groups cash position.
  • Total assets increased by 118% to ZWL$6.5 trillion, with cash holdings making up ZWL$1.8 trillion, loans and advances contributing ZWL$1.7 trillion and investment properties ZWL$271 billion. The loan book grew by 217%, while exposure to the agricultural sector declined from 36% to 21%, exposure to mining increased from 10% to 22%, and exposure to manufacturing rose 18% from 13%.
  • Total liabilities rose by 112% to ZWL$4.5 trillion, with deposits increasing by 113% to ZWL$4.5 trillion. The sector distribution of the deposits remained relatively stable, with services increasing from 87% to 89%
  • Among its segments, the banking and agro-business units remained the top performers with pre-tax profits of ZWL$356 billion and ZWL$255 billion respectively. The mortgage lending business showed the sharpest growth at 445% to ZWL$6.2 billion while the Asset Management segment saw a decline of 15% to ZWL$5.9 billion.
  • Going forward, the Group will continue to monitor developments around global interest rates with a view to tap into favorably priced lines of credit for the benefit of its various customers.
  • The group declared an interim dividend of USc0.525 per share.

Commentary and Analysis  

The sharp bottom line growth was largely driven by unrealized foreign exchange gains, while growth in the core revenue streams was relatively moderate. Commercial banking remains at the core of the group’s operations with CBZ Bank taking the lion’s share of commercial bank public deposits for most of the recent past. The split of deposits held by CBZ and its three largest competitors has remained relatively stable at around 73% for the last four years. The pending acquisition of the ZB Financial group should add around 5% to the CBZ groups share of public deposits. Otherwise, significant internal growth seems unlikely as the sector appears to be undergoing a maturation and consolidation process. So, going forward there should be a bigger focus on the groups non-banking segments. The Agrobusiness unit has experienced fairly sharp growth since its establishment, although the specific nature of its operations are somewhat murky. The group’s interest in First Mutual has seen its footprint in the domestic and regional insurance market indirectly grow. Given the groups balance sheet, there is scope for further acquisitions to expand its existing business lines. The group could also invest in alternative complementary businesses like FinTech and leverage its vast coverage to launch innovative financial products and services. Whichever way, the CBZ group’s status as titan of the local financial services sector has been cemented for a while. The short-term outlook for the rest of FY23 is stable, with the agricultural season likely to support increased business in the second half-year. Increased dollarization of staff and local service costs will likely depress the groups profitability.

On the ZSE, since the start of 2023, the CBZ share has gained 530% in nominal terms and shed 23% in real terms. The share is currently trading at a price to book ratio of 0.35x – Harare

By ETimes

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