NMB diversification drive pays off

NMB has launched a microfinance division, which is primed to offer competitive rates in the market and cater to the specialised sub-segment.

NMB Holdings’ thrust to diversify operations out of the core banking function has positioned the group for growth and to remain profitable, a research firm has said.

Steps made so far by the Group include the launch of a property development company using initial internal funding of US$3 million alongside a technology services division, which will act as a consultancy to regional banks increasing upside for foreign currency earnings.

NMB has also launched a microfinance division, which is primed to offer competitive rates in the market and cater to the specialised sub-segment.

IH Securities in a research for the Group, said these are encouraging developments from management to grow the company’s topline in a highly regulated industry.

According to the Group’s chief executive Gerald Gore, the new business thrust will be an additional source of foreign currency earnings for the Group. “The new subsidiaries and divisions have opened up new markets for the Group and have a clear vision on how to establish themselves as formidable players in their domains,” he said, commenting on the financials for the year ended December 31, 2022.

He said capital allocation was key and the new businesses were capitalised organically and all the Group’s subsidiaries are adequately capitalised and capacitated to pursue their strategic goals.

IH in its report said the macro environment has seen some positive developments with notable dissipation of inflationary pressures as a result of fiscal discipline, the tight monetary policy and enhanced monitoring and enforcement of market discipline in financial markets.

In line with receding inflation, the Reserve Bank of Zimbabwe (RBZ) has reduced the policy rate from 200 percent at the beginning of the year to 140 percent per annum improving borrowing terms for local currency loans.

IH said NMB’s thrust towards growing USD assets has resulted in the loan book now being 70 percent dollarised improving hard currency earnings for the Group.

“On this basis, we forecast a total income of $91,12 billion weighted towards non-funded income,” the research company said.

It noted despite a fluid policy environment, IH anticipated the group to remain in a profitable position to FY23 with net income of $47,52 billion, signifying a growth of 87 percent relative to 2022.

During the first half of the year, the macro-economic environment was characterised by increasing inflation and a deteriorating exchange rate.

These were, however, reigned in after the authorities put in place a raft of measures to contain money supply and curb speculative behaviour in the economy.

However, in the year to December 2022, the banking subsidiary continued to make inroads into new markets and cement existing relationships.

The bank entered an agency banking relationship with Zimpost to complement the 13 existing branches thereby increasing its geographical reach to a total of 119 branches and agencies.

NMBZ grew its loan book by 382 percent year on year to $46,29 billion in FY22 with fixed term corporate loans growing 535 percent year on year to $36,48 billion.

The agriculture sector composed 26 percent of NMB’s loan book whilst exposure to individuals decreased from 29 percent in 2021 to 18 percent in the year under review.

NMB appears to have maintained a high-quality loan book with NPL ratio decreasing from 1,39 percent as at FY21 to 1,09 percent in the current period.

The banking subsidiary had two new offshore funding agreements during the year- a European Investment Bank (EIB) facility of EUR12,5 million and a Trade and Development Bank line of US$10 million.

These balances were mainly deployed to export facing businesses as a credit risk strategy.

The Group’s revenue for the year rose 439 percent year on year to $43,90 billion and Fair value gains on investment properties recorded under ‘other income’ were a significant $17,94 billion and this drove bottom line profit after tax earnings to $25,47 billion in FY22, up 766 percent from prior similar period.

The bank remains compliant with the USD$30 million minimum capital requirement and has capital adequacy levels of 25 percent against a minimum requirement of 12 percent.

The bank closed the year with deposits of $53,21 billion, with 60 percent being in foreign currency.-ebusinessweekly