1
Unaudited Financial
Results For The 6
Months Ended 30
June 2014
- HY14 performance affected by 22% reduction in total income and
provision for discontinued operations….
2
Income Statemen...
- Strong balance sheet growth despite market challenges….
3
• Total assets growth restricted to 4% as the Group adopted a ...
- Ratios highlight strong inclination towards risk management and
sustainability than short-term returns….
4
Returns HY14 ...
- Improved revenue performance expected in the second half of
FY14….
5
14
29 29
35
27
26
34
40 29
40
63
69
63
0
10
20
30
4...
- Softening interest margins as credit absorption weakens….
6
1.1%
1.9%
1.7%
1.4% 1.3%
0.7%
0.6%
0.0%
0.5%
1.0%
1.5%
2.0%
...
- Non interest income continues to contribute more to Group
earnings….
7
• Non interest income has
contributed 71% to HY14...
- Growth experienced in major non interest income lines that are
within the Group’s control….
8
•Commissions and fees whic...
- Growth in Insurance Underwriting income led by reinsurance
activities….
9
• Net underwriting results increased by 2%
• R...
- Stringent cost control measures bear fruit as costs containment is
achieved ….
10
14.0
19.0
27.4
29.3
28.9
101%
65%
93%
...
- Mixed performance by business units….
12
-2.63
-0.32
-3.61
0.85
0.46
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
Banking
LifeA...
- Key service channels platform for sustainable
growth and profitability….
Branches are generally
profitable
• Only 5 out ...
- Group holds a substantial investment in properties ….
14
21%
5%
41%
7%
4%
1%
1%
5%
15%
Composition of Total Assets HY14
...
- Limited growth in advances lines due to tight credit risk
control….
15
• 4% Advances growth from December
2013 position....
- No major changes to the loan sectoral distribution between HY14
and FY13….
16
Private
22%
Agriculture
13%
Mining
20%
Man...
-Concerted effort underway to improve loan quality with NPLs
having increased from 18% to 22%....
17
1
4
9
27
30
41
2%
5%
...
-Adequate resources set aside from capital to cater for NPLs....
18
• Security cover on the NPLs
amount to 66% whilst prov...
- No major changes in the funding structure of Group operations
between FY13 and HY14…
19
22%
71%
1%
5% 1%
Composition of ...
- Deposit portfolio diversification good for management of
concentration risk….
20
19%
3%
1%
4%
3%
1%
1%
17%
37%
14%
Depos...
- Liquidity management has been the hallmark of our success in a
volatile environment….
21
• Liquidity ratio is above the ...
- Capital management remains a key focus area….
22
34%
17%
15% 14% 13% 13%
68%
54%
46%
45%
43%
45%
0%
20%
40%
60%
80%
100%...
23
-Outlook Period looks bright….
But pain-full strategies to be implemented to realign operations
•Further cost optimisat...
“A value driven and growth oriented leadership
culture adopted by the Group is expected to
stimulate the expansion of reve...
Thank you
25
Data Card - ZB Bank Limited
26
Income statement HY14 HY13 Change %
Total Income 20 581 134 22 395 687 -8%
Total Expenditur...
Data Card - ZB Building Society
27
Income statement HY14 HY13 Change %
Total Income 3 695 168 3 829 807 -4%
Total Expendit...
Data Card - ZB Life Assurance
28
Income statement HY14 HY13 Change %
Total Income (1 725 489) 4 547 725 -138%
Total Expend...
Data Card -ZB Reinsurance
29
Income statement HY14 HY13 Change %
Total Income 2 193 806 2 099 160 5%
Total Expenditure 1 0...
Data Card - Investment Banking
30
Income statement HY14 HY13 Change %
Total Income 645 603 1 081 324 -40%
Total Expenditur...
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ZB Financial Holdings Limited HY 2014 financial presentation

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ZB Financial Holdings Limited listed on the Zimbabwe Stock Exchange has released its half year results presentation. Check out insights into this company in their presentation which appears below.
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ZB Financial Holdings Limited HY 2014 financial presentation

  1. 1. 1 Unaudited Financial Results For The 6 Months Ended 30 June 2014
  2. 2. - HY14 performance affected by 22% reduction in total income and provision for discontinued operations…. 2 Income Statement HY14 HY13 $ % Net Interest Income 9 593 461 10 616 008 (1 022 547) -10% Charge for impairment (1 699 490) (157 739) (1 541 751) -977% Net Reinsurance Income 1 727 007 1 492 280 234 728 16% Net Assurance Income 2 188 018 2 358 097 (170 078) -7% Non-Interest Income 15 048 967 20 288 789 (5 239 821) -26% Net Income 26 857 963 34 597 434 (7 739 471) -22% Operating Expenses (28 930 229) (29 326 053) 395 824 1% (Loss) / Profit Before Tax (2 072 266) 5 271 381 (7 343 647) -139% Transfer form / (to) Life Fund 453 235 (1 905 127) 2 358 362 124% (Loss) / Profit After Tax (2 627 622) 2 209 432 (4 837 054) -219% Change (y-o-y) • Total Revenue reduced by 22% largely as a result of 25% reduction in lending income • A culture of full disclosure and prudence in assessing the credit book resulted in the charge for loan Impairments increasing by 977% • Insurance technical results remained flat (only 1% increase) with both life assurance and re- insurance contributing at about the same level. • $392.7 thousand impairment provision on insurance debtors included in the net technical result • A marked reduction in non-funded income largely pronounced by a $2.2m fair value loss (HY13: profit of $1.6m) • OPEX managed at almost same level as HY13 despite pressure. (2.07) (5)5.27 0.23 (1) (2) (0) (0) -$,6 -$,4 -$,2 $,0 $,2 $,4 $,6 PBTHY13 NetReinsurance Income Non-InterestIncome NetInterestIncome Chargefor impairment NetAssuranceIncome OperatingExpenses PBTHY14 Millions
  3. 3. - Strong balance sheet growth despite market challenges…. 3 • Total assets growth restricted to 4% as the Group adopted a deliberately cautious approach to asset creation in response to amplified credit risk on the market. Greater focus was placed on asset quality rather than quantity. • Advances book increased by 4% with mortgage backed facilities having contributed a 49% of the increase. • Strong growth in the deposit book, at 6%, in a market fraught with internecine liquidity challenges is a vindication on the Group’s risk management practices and also a reflection of aggressive business mobilisation activities HY14 $m FY13 $m Total Assets 344.3 332.0 4% Total Advances 137.2 131.7 4% Total Deposits 231.3 218.6 6% Shareholders' Funds 64.6 67.3 -4% Life Assurance Funds 24.0 24.5 -2% Total Advances Growth 4.1% -3.3% 226% Total Deposits Growth 5.8% 0.9% 567% Change %
  4. 4. - Ratios highlight strong inclination towards risk management and sustainability than short-term returns…. 4 Returns HY14 HY13 Change % Return on Equity -2% 1% -271% Return on Assets 0% 2% -120% Earnings per Share (0.01) 0.01 -200% Net Assets per Share 0.37 0.38 -4% Efficiency Non-Interest income Ratio 71% 70% 1% Cost to Income Ratio 108% 85% -27% • Negative returns and efficiency outturn are a reflection of the short-term misalignment of revenues against an entrenched infrastructure base – amplifies the case for a review of the business model in order to optimise returns out of a mature operating platform. • The increase in the NPL ratio is a result of residual clean-up activities on the credit book; largely constituted by credit granted in the nascent stages of dollarisation when businesses were generally buoyant about their prospects - a macro level crisis with some learning points for the Group. • Liquidity ratios and the level of cash cover in the Group, besides meeting regulatory requirements, speak of long term sustainability. • Alternative capital would be an added advantage notwithstanding the high CAR achieved as it would stimulate further growth . Asset Quality HY14 FY13 Change % NPL ratio 22% 18% -28% Liquidity Ratio Loans to Deposit Ratio 59% 60% -2% Liquidity Ratio 40% 39% 3% Cash cover 32% 32% 0% Capital Adequacy Ratio Tier 1 Capital Ratio 19% 20% -7% Total Capital Ratio 19% 20% -7%
  5. 5. - Improved revenue performance expected in the second half of FY14…. 5 14 29 29 35 27 26 34 40 29 40 63 69 63 0 10 20 30 40 50 60 70 80 FY10 FY11 FY12 FY13 HY14 Millions Total Income Trend 1st Half 2nd Half Total income • Revenue performance has always been stronger in the second half and FY14 is expected to be no exception. Sources will include:- • Increased customer accounts and transaction volumes (fees) • New products • Increased customer reach leveraging on technology • Strategic and operational alliances with key customers • $3.3m in interest credits was lost to interest reservation for HY14; expected partial release to income statement in future periods as collections on defaulting loans happen.
  6. 6. - Softening interest margins as credit absorption weakens…. 6 1.1% 1.9% 1.7% 1.4% 1.3% 0.7% 0.6% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% FY09 FY10 FY11 FY12 FY13 HY13 HY14 Net Interest Margin • Interest margins continued to soften shedding 0.1 basis points to 0.6% at HY14. • The downward slope in the trend-line since FY09 is consistent with general movement in interest rates on the market (natural price correction since dollarisation). • Term deposits constitute a significant portion of the funding and contribute a material interest cost.
  7. 7. - Non interest income continues to contribute more to Group earnings…. 7 • Non interest income has contributed 71% to HY14 • A strong customer base which has been on the increase (3% increase in banking accounts from 31 December 2013 to 30 June 2014), key in commission revenue growth • Spasmodic fair value outturn has caused total income volatility; these are not realised losses. • The Group remains watchful of opportunities to exploit value out of the investment portfolio. 8 23 20 25 20 21 20 27 17 0 71% 68% 69% 66% 71% 63% 64% 65% 66% 67% 68% 69% 70% 71% 72% 0 5 10 15 20 25 30 35 40 45 50 FY10 FY11 FY12 FY13 HY14 Millions Non-Interest Income Trend 1st Half 2nd Half Non-Interest Income Ratio
  8. 8. - Growth experienced in major non interest income lines that are within the Group’s control…. 8 •Commissions and fees which are the major contributor to non interest income contributed 77% in HY14 against 63% in HY13 •Other major lines have also improved when compared to last year HY13, as the Group pushes for new business in reinsurance and life assurance business sectors 63% 77% 6% 9% 10% 11% 7% -11% 14% 15% -20% 0% 20% 40% 60% 80% 100% 120% HY13 HY14 Commissions and fees Net Reinsurance Income Net Life Assurance Income Fair Value Adjustments Other Income
  9. 9. - Growth in Insurance Underwriting income led by reinsurance activities…. 9 • Net underwriting results increased by 2% • Re-insurance technical result increased by 16% on the back increased treaty participation and more facultative business as underwriting capacity increased. • Re-insurance underwriting margin closed at 11%, a comfortable level for sustained profits • New markets in the region are being explored • Life Assurance technical result decreased by 7% despite a 13% increase in Gross premium. • Policy holder benefits increased by an aggregate 50% 13% 11% 11% 11% 12% 12% 12% 12% 12% 13% 13% - ,2 ,4 ,6 ,8 ,10 ,12 ,14 ,16 HY14 HY13 Millions Net Reinsurance Income Gross premiums Net reinsurance income Net reinsurance income to gross premiums 53% 65% 0% 10% 20% 30% 40% 50% 60% 70% - ,1 ,1 ,2 ,2 ,3 ,3 ,4 ,4 ,5 HY14 HY13 Millions Net Assurance Income Gross premiums Net assurance income Net assurance income to gross premiums
  10. 10. - Stringent cost control measures bear fruit as costs containment is achieved …. 10 14.0 19.0 27.4 29.3 28.9 101% 65% 93% 85% 108% 0% 20% 40% 60% 80% 100% 120% 0 5 10 15 20 25 30 35 HY10 HY11 HY12 HY13 HY14 Millions Operating Expenses Trend Total Expenditure Cost to Income Ratio • OPEX reduced by 1% in HY14 compared to HY13. • In nominal terms, the OPEX level remains competitive in relation to size of operations despite a 108% cost efficiency ratio. • Several measures to increase operational efficiencies are underway– the impact of these measures are expected in the second half to medium term. • Business model review has seen unviable and non- core businesses (ZB Asset Management, ZB Securities, In-sourced Security and Cleaning Services) being discontinued. • Staff numbers have been reduced from +1.6k at 31 Dec 2013 to +1.2k at 30 Jun 2014 • Paperless transactions in banking operations to reduce cost. • Review of space utilisation in progress and partially implemented. • A refresh of technologies and optimisation of current services to reduce service costs.
  11. 11. - Mixed performance by business units…. 12 -2.63 -0.32 -3.61 0.85 0.46 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 Banking LifeAssurance Reinsurance Othersegments Total Millions Business Unit Contribution to PAT -2.63 -1.38 -,1.25 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 Continuing operations Discontinued operations Total Millions Continuing vs Discontinued Operations Results
  12. 12. - Key service channels platform for sustainable growth and profitability…. Branches are generally profitable • Only 5 out of 66 Branches not making a profit • These are largely new branches still in their infancy and still on track to achieve break-even in target period • 2 Branches closed as a result of constrained performance Usage of Electronic Channels on the increase •ATM Card usage increased by 14% •Transactions count on POS and ATM increased by 48% •Cards in circulation increased by 27% to 264k •In-branch POS usage increased by 104% on withdrawals and 562% on deposits transacting +$157 million. CRM promoting customer loyalty and growth • 14% growth in payment transaction count on Group platforms • 16% increase by value • +2 400 new accounts opened for informal traders Business partnerships enhancing customer experience • Facilitating integrated payments for an increasing number of business partners • Prepaid electricity vouchers vending a key addition in the period under review • Agency banking roll-out for full banking services underway (4 already launched) 13
  13. 13. - Group holds a substantial investment in properties …. 14 21% 5% 41% 7% 4% 1% 1% 5% 15% Composition of Total Assets HY14 Cash and short term funds Money market investments Mortgages and other advances Investment securities Investment in associates Other assets Premium debtors Investment properties Property and equipment +$9 million in funding was mobilized through property backed structures, inclusive of the $5 million Agro-bills
  14. 14. - Limited growth in advances lines due to tight credit risk control…. 15 • 4% Advances growth from December 2013 position. • Mortgage facilities increased marginally from 7% to 8% and are set to grow as more property development is undertaken. • Finance leases remained low at 3% ,24 ,77 ,118 ,136 ,132 ,137 228% 53% 16% -3% 4% -50% 0% 50% 100% 150% 200% 250% - ,20 ,40 ,60 ,80 ,100 ,120 ,140 ,160 FY09 FY10 FY11 FY12 FY13 HY14 Millions Total Advances Trend and Growth Total Advances Trend Loans Growth
  15. 15. - No major changes to the loan sectoral distribution between HY14 and FY13…. 16 Private 22% Agriculture 13% Mining 20% Manufactur ing 13% Distributio n 7% Contructio n 2% Transport 2% Services 12% Financial 1% Other 8% FY13 Private 24% Agriculture 13% Mining 19% Manufactu ring 11% Distributio n 7% Contructio n 1% Transport 1% Services 13% Financial 4% Other 7% HY14
  16. 16. -Concerted effort underway to improve loan quality with NPLs having increased from 18% to 22%.... 17 1 4 9 27 30 41 2% 5% 6% 17% 18% 22% 0% 5% 10% 15% 20% 25% 0 5 10 15 20 25 30 35 40 45 FY09 FY10 FY11 FY12 FY13 HY14 Millions Non-performing Loans Non-performing Loans NPL Ratio • Deterioration in NPL ratio partly a result of the low growth in the aggregate loan book • Significant portion of NPLs are in the Manufacturing Sector Private 16% Agriculture 21% Mining 16% Manufacturing 31% Distribution 12% Construction 1% Transport 0% Services 2% Communication 1% SECTORAL ANALYSIS OF NON-PERFORMING LOANS
  17. 17. -Adequate resources set aside from capital to cater for NPLs.... 18 • Security cover on the NPLs amount to 66% whilst provisions (including interest reservation) amount to 43%, giving a total cover of 109% 0 1 3 7 8 12 3.42 5.75 3.62 5.18 0.93 0.36 0.51 0.65 44% 63% 87% 47% 42% 43% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 2 4 6 8 10 12 14 16 18 20 FY09 FY10 FY11 FY12 FY13 HY14 Millions Interest Reserves Specific provision Portfolio provision Total Provisions
  18. 18. - No major changes in the funding structure of Group operations between FY13 and HY14… 19 22% 71% 1% 5% 1% Composition of Total Liabilities / Equity FY13 Total equity Deposits and other accounts Short-term borrowings Trade and other payables Current tax liabilities Deferred tax liabilities 20% 73% 2% 4% 1% Composition of Liabilities / Equity HY14 Total equity Deposits and other accounts Short-term borrowings Trade and other payables Current tax liabilities Deferred tax liabilities
  19. 19. - Deposit portfolio diversification good for management of concentration risk…. 20 19% 3% 1% 4% 3% 1% 1% 17% 37% 14% Deposits Composition by Customer Type FY13 Individuals Agriculture Mining Manufacturing Distribution Contruction Transport Services Financial Other 20% 3% 1% 11% 3% 1% 1% 24% 23% 13% Deposits Composition By Customer Type HY14 Individuals Agriculture Mining Manufacturing Distribution Contruction Transport Services Financial Other • Financial sector deposits reduced from 37% to 23%
  20. 20. - Liquidity management has been the hallmark of our success in a volatile environment…. 21 • Liquidity ratio is above the minimum pegged at 30%. • Well balanced Loans to Deposits Ratio trend, averaging 61%. • Ratios show a commitment to the provision of uninterrupted service delivery to our customers. • Liquidity is generally an area of major concern on the market 45% 67% 70% 63% 61% 59% 50% 37% 34% 38% 39% 40% 0% 10% 20% 30% 40% 50% 60% 70% 80% FY09 FY10 FY11 FY12 FY13 HY14 Loans to Deposits Ratio Trend Liquidity Ratio Trend
  21. 21. - Capital management remains a key focus area…. 22 34% 17% 15% 14% 13% 13% 68% 54% 46% 45% 43% 45% 0% 20% 40% 60% 80% 100% 120% FY09 FY10 FY11 FY12 FY13 HY14 Capital Adequacy Ratio Trend Capital Adequacy Ratio for ZB Building Society Capital Adequacy Ratio for ZB Bank Limited • The minimum capital adequacy ratio is 12% • Enhancement of capital by focusing on improving asset quality and income generation capacity.
  22. 22. 23 -Outlook Period looks bright…. But pain-full strategies to be implemented to realign operations •Further cost optimisation through a right-sizing exercise to be undertaken. •Implementation of measures will lead to front-loaded costs which will affect short-term results. •Close scrutiny on non-viable operations and channels which may lead to further closures or re-orientation. New revenue opportunities to be exploited •Through partnerships with stakeholders. • Development of new markets (e.g. Mozambique for ZB Re and Agency Banking for ZB Bank). •Aggressive mobilisation of funding (Increase investible paper following on the success of the $5m Agro-bill) • Group led property development thrust. Technology to play a key part in the service delivery •Capital expenditure in the technology space to increase in the short-term. •A refresh of front-facing technologies already underway. •Increased profit contribution to be led by electronic channels.
  23. 23. “A value driven and growth oriented leadership culture adopted by the Group is expected to stimulate the expansion of revenue opportunities which is anchored on increased operational efficiencies” 24 -Parting words….
  24. 24. Thank you 25
  25. 25. Data Card - ZB Bank Limited 26 Income statement HY14 HY13 Change % Total Income 20 581 134 22 395 687 -8% Total Expenditure 21 385 558 20 305 556 -5% Charge for impairment 1 586 171 389 300 -307% Profit Before Tax (804 424) 2 090 131 -138% Profit After Tax (529 057) 1 371 114 -139% Financial position HY14 FY13 Change % Total Assets 282 636 094 257 376 562 10% Total Advances 134 002 997 132 198 843 1% Total Deposits 234 985 022 211 111 402 11% Shareholders' Funds 35 605 772 36 134 829 -1% Key ratios HY14 HY13 Change % Return on Equity -2% 6% -139% Return on Assets 0% 2% -119% Cost to Income Ratio 104% 91% -15%
  26. 26. Data Card - ZB Building Society 27 Income statement HY14 HY13 Change % Total Income 3 695 168 3 829 807 -4% Total Expenditure 3 451 443 2 834 102 -22% Charge for impairment (113 184) 245 202 -146% Profit Before Tax 243 725 995 705 -76% Profit After Tax 242 507 991 295 -76% Financial position HY14 FY13 Change % Total Assets 41 690 824 36 779 647 13% Total Advances 16 766 637 12 651 218 33% Total Deposits 22 676 417 18 395 691 23% Shareholders' Funds 16 804 913 16 562 406 1% Key ratios HY14 HY13 Change % Return on Equity 1% 5% -73% Return on Assets 1% 3% -76% Cost to Income Ratio 93% 74% -26%
  27. 27. Data Card - ZB Life Assurance 28 Income statement HY14 HY13 Change % Total Income (1 725 489) 4 547 725 -138% Total Expenditure 2 468 728 2 350 777 -5% Profit Before Tax (3 740 982) 291 820 -1382% Profit After Tax (3 605 486) 129 098 -2893% Financial position HY14 FY13 Change % Total Assets 28 213 849 32 483 245 -13% Money Market Investments 2 302 614 2 751 511 -16% Investment Properties 3 433 005 3 433 005 0% Life Assurance Fund 24 014 286 24 467 521 -2% Shareholders' Funds 2 433 113 6 038 599 -60% Key ratios HY14 HY13 Change % Return on Equity -88% 5% -1946% Return on Assets -12% 1% -1477% Cost to Income Ratio -143% 52% -377%
  28. 28. Data Card -ZB Reinsurance 29 Income statement HY14 HY13 Change % Total Income 2 193 806 2 099 160 5% Total Expenditure 1 060 217 1 120 958 5% Profit Before Tax 1 133 589 978 202 16% Profit After Tax 845 392 791 929 7% Financial position HY14 FY13 Change % Total Assets 12 818 888 12 170 206 5% Insurance Receivables 2 030 833 2 065 822 -2% Money Market Investments 7 420 000 7 100 000 5% Investment Securities 2 003 312 1 775 286 13% Shareholders' Funds 7 811 815 6 966 423 12% Key ratios HY14 HY13 Change % Return on Equity 15% 14% 9% Return on Assets 9% 8% 13% Cost to Income Ratio 48% 53% 9%
  29. 29. Data Card - Investment Banking 30 Income statement HY14 HY13 Change % Total Income 645 603 1 081 324 -40% Total Expenditure 1 564 322 1 064 465 -47% Profit Before Tax (918 718) 16 859 -5549% Profit After Tax (1 314 678) 131 548 -1099% Financial position HY14 FY13 Change % Total Assets 1 832 080 2 929 513 -37% Money Market Investments 411 305 475 484 -13% Investment Securities 404 761 961 574 -58% Shareholders' Funds 613 781 1 928 459 -68% Key ratios HY14 HY13 Change % Return on Equity -72% 1% -8368% Return on Assets -39% 1% -6805% Cost to Income Ratio 242% 98% -146%
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