Mixed Fortunes In NMB's HY-21 & What Lies Ahead

Author Name
Rugare Mukanganga
Markets 1 month ago

ZSE-listed financial services firm NMB Bank performed well in the six-months ended 30 June 2021, as net-income grew 105% to settle at ZWL 716.2m from ZWL 348.8 million recorded in the previous comparative period. The remaining six-month period of the year however remains cloudy, with internal uncertainties stemming from the Bank's tech investments.

  • Fee & Commission Income 128%
  • FX Gains ↑ 74%  
  • Total Costs ↑ 110%

HY-21 Operating Income

Fee and commission income jumped 128% from ZWL 498.4m recorded in the prior comparative session to ZWL 1.1 billion in inflation adjusted terms. The increase was enhanced by a surge in the level of transaction volumes backed the Bank’s digitisation drive. Foreign currency gains came-off in the period under review, settling at ZWL 71.6m from ZWL 275.1m as at June 2020. The decline in forex gains corresponds with the relative stability of formal ZWL:USD exchange rates following the Central Bank auction system’s launch in June 2020.  

HY-21 Operating Expenditure

Zimbabwe's banking sector is still struggling with an increasing expenditure base  due to a business environment characterised by COVID-19 and lingering inflationary pressure, despite market influence from both softening over time. In the six month period under review, the Bank recorded an 89% increase in total expenses to ZWL 1.3billion from ZWL 681 billion recorded in the half-year ended June 2020.

Staff costs,  which encompass 41% of total costs, shot up 110% to ZWL 521m, this amidst a review of short-term benefits and payroll related costs. More so, the increases in operating expenditure were IT related costs arising from the Bank embarking on a massive digitisation scheme. An additional significant operational cost contributor was high office rentals costs. 

What lies ahead?

While the NMB Group’s Robotics Process Automation rollout is an industry-leading development, it raises the question of its scope in application and one may wonder if the technology can address cost growth concerns in the face of increased business volumes. An implication of further banking automation however is a decreased need for human labour, indicating potential layoffs down the line. As NMB Bank pushes forward its digital agenda, it should exercise caution when it comes to inclusivity – the more advanced banking platforms become, the narrower the set of clients it may actually connect with due to financial and tech literacy gaps that may be demography related.

Caution should also be placed towards performance of loans considering how the Bank plans to loosen credit application procedures to encourage borrowing. Having met Central Bank capital requirements as a result of focused core operating income generating strategies, we anticipate a gradual retreat in the Group’s approach but business volumes should extend into the closing quarter of the year on the back of an increasingly stable economic environment and medium to long-term investment opportunities that brings with it.

Report compiled by Equity Axis Research

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