ZB to sell $6mln NPLs to Zamco at huge discount

ZB to sell $6mln NPLs to Zamco at huge discount

HARARE, May 27 (The Source) – ZB Financial Holdings is set to sell debts amounting to $6,3 million to the Zimbabwe Asset Management Company (Zamco) at a discount of 56 percent, a net of $3,5 million, as the group seeks to reduce the level of its non-performing loans.

Group chief executive Ron Mutandagayi told shareholders at an annual general meeting that the bank’s NPL ratio currently was high at 20 percent and the group is unlikely to meet a central bank imposed target of 10 percent or lower by next month.

“The group has reached tentative agreements with the Zimbabwe Asset Management Company (ZAMCO) for the sale of debts amounting to $6,3 mln at a discount of 56 percent, giving a net of $3,5 million,” Mutandagayi said in a trading update for the four months period to April 2016.

“It is anticipated that the settlement of $3,5 million should take place by 30 June 2016.”

He said the NPL ratio remains a key focus in the year and an aggressive recovery of debts combined with new lending to good quality clients would be pursued.

In the four months, the loan book was reduced by one percent to $98,9 million from the December 31, 2015 position while loan impairments were at $1,5 million, down from $1,7 million in prior year.

According to central bank, the industry average NPL ratio is 11 percent. As at December 2015, Zamco had acquired NPLs amounting to $357 million.

Operating income for the period increased marginally by one percent to $19,4 million from $19,2 million in April, 2015.

According to Mutandagayi, the increase is attributed to a 19 percent growth in income from trading and lending activities and a 38 percent increase in re-insurance income.

He said that the increase in income from trading and lending activities was influenced by the release of discounts on Treasury Bills, an 18 percent reduction in funding costs as well as a lower charge for loan impairments.

Re-insurance premiums increased as a result of renewals which were brought forward to the first quarter of 2016. Of the Gross Premium Written to April 30, 2016, 86 percent were written from local operations while the rfemsinder was sourced from Mozambique.

The reduction in the net life assurance income of 21 percent was largely influenced by increased death claims on the ZB Cash Funeral Cover business. Life assurance expenses for the period increased 33 percent over the same period last year.

Mutandagayi said the current market-wide shortage of bank notes has affected the growth of non-funded income as aggregate customer transaction activity fell.

He said revenue generation remained very difficult in the constrained environment, forcing the group to focus on cost management.

The group’s cost to income ratio for the period stood at 78 percent compared to 76 percent in the prior year. He said the annual target cost to income ratio for 2016 is 71 percent.

On a net basis, the cumulative profit for the period amounted to $2,3 million compared to $2 million in 2015 in line with the group’s budget.

Deposits remained at December, 2015 level of $270 million.