Steward Bank profit falls 75pc
Steward Bank recorded a significant decline in profitability in the year to February 29, 2024, following a 75 percent dip in after-tax profit to $68 billion from $278 billion achieved in the same period the previous year.
The bank’s operating income exhibited a steep decline of 62 percent to $2,3 trillion from $6,1 trillion recorded in the comparable period the prior year.
Contributing to this underperformance was a 58,7 percent decrease in income from lending activities, a 72,8 percent drop in exchange gains, and a 90,4 percent decrease in income from fair value adjustments.
However, excluding the aforementioned challenges, Steward Bank’s income from core banking activities increased to $789 billion compared to $458 billion in 2023.
Steward Bank attributed this growth primarily to the bank’s focus on foreign currency transactions, a strategy aligned with their digital-first approach targeting the underbanked population.
The bank has embarked on a massive digitalisation programme winning itself accolades for most outstanding digital bank in Zimbabwe.
The bank rolled out several digital innovations in the year under review aligned with its objectives of promoting digital financial inclusion.
Some of these innovations include the digital banking agent portal which is a solution that digitalises agent banking services enabling the bank to spread its footprint across the country covering both rural and urban areas.
Chief executive officer Courage Mashavave said the bank continues to integrate Artificial Intelligence (AI) into its products ensuring that customers can access personalised services.
“Some of the AI use cases include service and product recommendations on our Square mobile banking app which makes suggestions of potential services that our customers can access based on transactional behaviour,” he said.
Despite this positive sign net interest income, a key metric for traditional banks, became a negligible contributor to overall operating income.
Analysts think this raises questions about Steward Bank’s long-term sustainability if it relies solely on transactional income.
“Under normal circumstances, interest income should be the main revenue driver of a commercial bank, otherwise it is just a transactional platform in the form of a bank,” said Equity Axis.
On a brighter note, the bank did manage to reduce operating expenditure by a substantial 275 percent, likely due to a decrease in exchange and monetary losses.
However, this positive development was partially offset by significant increases in staff costs (68,2 percent) and other administrative expenses (56,8 percent), a trend likely fuelled by a hyperinflationary environment.
-herald
