Agribank returns to profitability

HARARE - Agriculture-focused financial institution, Agribank, has bounced back to profitability, earning $2,16 million in the six months to June 2016.

The latest results compare favourably with the $3,76 million recorded in the same period last year.

Agribank chief executive Sam Malaba said the profit was mainly a result of the positive outcome of the bank’s business growth strategies implemented following the conclusion of staff rationalisation and injection of capital by the shareholder in 2015.

“The bank also benefitted from the transfer of some of its non-performing loans (NPLs) to Zimbabwe Asset Management Corporation (Zamco),” he said.

This comes after Agribank transferred non-performing loans valued at $17,2 million to the central bank’s special purpose vehicle, which resulted in NPL ratio reducing significantly to 13,97 percent.

The NPLs mainly related to huge exposures to agriculture and agro processors, giving rise to significant impairment charges adversely affecting on the performance of the bank.

In the period under review, Agribank’s net interest income at $6,49 million was 89,2 percent higher than $3,43 recorded in 2015 driven by diversified lending.

Non-interest income marginally increased by two percent from $7,05 million in 2015 to $7,18 million in 2016.

“Cost containment measures resulted in operating costs, declining by 5,7 percent to $10,74 million in the first half of 2016 compared to $11,39 million over a similar period in 2015,” Malaba said adding that the bank was set to sustain cost containment in 2016 and beyond.

Agribank’s loans and advances shrunk by eight percent to $104,69 million during the period under review, while total assets increased by 14 percent to $192,8 million in the first half of the year compared to $168,9 million for the period ended December 2015.

Malaba noted that it was the financial institution’s intention to ensure that asset quality is prioritised through tighter lending criteria to minimise the level of non-performing loans.

“The liquidity ratio at 54 percent compares favourably with industry average and surpasses the minimum regulatory requirement of 30 percent. Similarly, the capital adequacy ratio at 28 percent is more than double the minimum regulatory requirement of 12 percent,” he said.

In the half year to June, the bank’s tier 1 capital was $33,817 million compared to $33,812 million in June last year, indicative of preservation of capital over the first 12 months after capitalisation.

“The bank appreciates the capitalisation support from the shareholder, which has enabled the bank to underwrite new business growth,” Malaba said.

“Beyond the near term, Agribank will seek further capitalisation level to the tier 1 bank level of $100 million as minimum regulatory requirement for the bank to offer a full range of banking and financial services and attract suitable lines of Credit, now that the bank is no longer under OFAC sanctions,” he added.

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