ZB Financial Holdings Analysts’ presentation Audited results for the year ended 31 December, 2018
Market recognition of the Group’s efforts remained high.… Superbrand’s 2018 Top 200 Brands – Participant in the Superbrand Research Report ( MAZ ) Top 100 Local Brands 2018 – Nominated among Zimbabwe’s top 100 local brands ( BUY ZIMBBAWE ) Property development – Commercial projects - 1 st runner up - Zimbabwe Project Management 2017 Awards ( CIPMZ ) Best bank supporting SMEs development - 1 st runner up 2017 ( ZNCC ) Silver medal - Best SMEs Business Advisory Services -SMEs International Expo 2016 ( BUSINESS CONNECT ) Outstanding Financial Institution of the year - 1 st runner up - Business Awards 2016 ( MEGAFEST ) Best Turnaround Strategy in 2015 - Zimbabwe Quoted Companies Survey 2016 Awards ( ZIMBABWE INDEPENDENT ) 2 www.zb.co.zw
Business Environment : An overview 01 3 www.zb.co.zw 3
Headwinds persisted in the business environment in FY18.... National payments Persistent cash and systems skewed Broad money forex shortages and towards mobile supply increased sustained currency platforms – 85.4% by 28% y-o-y. arbitrage. volume contribution. ZSE experienced Y-o-y inflation Negative real increased volatility, closed at 42.09% returns on interest with capitalisation in Dec 18. earning assets. going up by 124.5% o The Ministry of Finance & Economic Development estimated GDP growth for FY18 at 4%, down from an initial projection of 4.5% with constrains being experienced across most sectors. o The El Nino phenomenon contributed significant downside risk affecting food security. o Currency dynamics affected business confidence in the wake of rising inflation and value erosion. 4 www.zb.co.zw
Whilst the Group continued to make inroads.... Geographical footprint US$30m lines of credit Enhanced partnerships Increased volume of reviewed: new sub- mobilised from regional with Afreximbank, Trade foreign transactions branch opened in financial institutions and & Development Bank (WorldRemit & Mukuru) Glendale Q3 2018 whilst at various stages of (TDB), AfDB and IFC as well as DStv payments Mutare branch utilisatiion refurbished – Q1 2018. MTA Growth FY18 FY17 % Inc Volume 37.1k 3.4k 986 Val ($)m 7.71 0.74 938 Significant investment Partial success in POS network expanded; made to improve New suite of Hospital fundraising for roads 1500 new mPOS performance of IT Cash Plan products rehabilitation (+US$62m machines at distribution channels and overall launched in Q3 2018 out of a mandate of stage customer experience US$150m from ZINARA) +$5m 5 www.zb.co.zw
Whilst the Group continued to make inroads.... Property sales placed on Roll-out of renewable Cumulative count for Customer Care Clinics hold in order to preserve energy solutions in household electricity and Wellness programs value. Servicing to partnership with selected reticulation now above completed to horne skills “stock” will continue universities and local 4,000 units and increase staff subject to resource authorities continued engagement levels availability. Branch refurbishment Group-wide product program slowed down as audit commissioned and a result of unforeseen completed price escalations 6 www.zb.co.zw
Credit ratings remained stable whilst the target is to achieve investment grade ratings across all units.... Company FY18 FY17 Rating Review Date ZB Bank Limited BB BB- Sept, 2019 ZB Building Society BB- BB Sept, 2019 ZB Reinsurance Limited A- A- May, 2019 7 www.zb.co.zw
The Group is targeting a tier 1 capital level of $100m for its banking operations by 2020…. As at 31 December 2018 (US$m) Excess 2020 Gross Capital Regulatory Regulatory Available Gap Company Regulatory Base Capital Minimum against to 2020 Target regulated 70.8 71.7 25 46.7 100 (28.3) ZB Bank Limited 18.9 18.9 20 (1.1) 25 (6.1) ZB Building Society 12.1 12.1 5 7.1 5 7.1 ZB Reinsurance Limited 19.0 19.0 2.5 16.5 5 14.0 ZB Life Assurance 1.2 1.2 0.15 1.0 0.15 1.0 ZB Transfer Secretaries Limited 8 www.zb.co.zw
Financial Outturn 02 9 www.zb.co.zw 9
Financial results only comply with IFRSs partially and carry an adverse audit opinion.... 1. The adverse opinion arises from the failure to fully comply with IAS 21 “Effects of Changes in Foreign Exchange Rates” 2. Compliance with IAS 21 would have been required to recognise the impaired convertibility of the local currencies to other foreign currencies 3. The US$ has been used as the functional and reporting currency in the financial results to 31 December 2018 in compliance with SI 33 of 2019 and applying the guidance from PAAB on the subject. 4. Sensitivity analysis has been incorporated in the detailed financial statements to show the possible impact of translating the Statement of Financial Position to the new currency, the ZWL, at various rate scenarios as at the reporting date. 10 www.zb.co.zw 10
Nominal performance for FY18 was ahead of the FY17 outturn…. • Profit increased by 54% from US$14.15m in FY17 to US$21.79m in FY18 resulting in the EPS increasing by 51% from US8.29c to US12.5c whilst the ROE improved from 14% to 20% over the same period. Summarised statement of profit or loss Profit after tax ($m) FY18 FY17 % US$(m) US$(m) Change Total Income 83.53 68.95 21% 21.79 Total expenses (56.20) (50.94) -10% Profit Before Tax 27.33 18.01 52% 14.15 11.43 Movement in the Life Fund (5.63) (3.56) -58% 9.36 Share of profit in associate 2.24 3.04 -26% Income tax expense (2.15) (3.34) 35% Profit for the period 21.79 14.15 54% FY15 FY16 FY17 FY18 Earnings per share (EPS) (cents) 12.52 8.29 51% Return on equity (ROE) 20% 14% 600bp 11 www.zb.co.zw
Income concentration in non-funded sources remained high; contribution from lending activities improved…. Total income contribution Total income contribution FY18 FY17 % NELA NRI NLA NFI US$(m) US$(m) Change Net earnings from trading and 23% lending activities (NELA) 19.09 14.81 29% FY18 21% Net reinsurance income (NRI) 2.25 3.18 -29% 65% FY17 5% 3% 9% Net life assurance income (NLA) 7.70 6.41 20% 9% 65% Non-funded income (NFI) 54.49 44.56 22% Total income 83.53 68.95 21% 12 www.zb.co.zw
Interest rates were soft as excess liquidity dominated most of the year…. • Interest paying liabilities re-priced faster than interest earning assets resulting in a higher NII to GII ratio from 72% in FY17 to 79% in FY18. • A net charge of US$4.9m was posted for FY18 in respect of impairment on non performing loans against a charge of US$3m for FY17. FY18 FY17 % Interest earning assets (US$m) and Interest Margin Analysis(%) Net interest income US$(m) US$(m) Change Interest earning assets Interest margin Gross interest income(GII) 30.57 24.82 23% 327 350 0.62% Interest expense 6.56 7.01 6% 300 0.61% 264 250 0.60% 223 210 Net interest income(NII) 24.01 17.81 35% 200 0.59% Net impairment movement (4.92) (3.00) -64% 150 0.58% 100 0.57% Net earnings from lending activities 19.09 14.81 29% 50 0.56% NII to GII ratio 79% 72% 700bp 0 0.55% FY15 FY16 FY17 FY18 Net interest margin 29% 26% 300bp 13 www.zb.co.zw
Life assurance premiums improved underpinned by growth in new business…. • The technical result improved by 20%, driven by a 17% increase in gross premiums which was partially offset by a 12% increase in policy benefits and reassurance premium commission expenses. • Policy surrenders increased by 14% as household income levels deteriorated due to a resurgent inflationary trend. • The technical expense ratio however improved from 45.2% in FY17 to 43.5% in FY18. Net life assurance premium income (US$m) Net Life Assurance Premium Income FY18 FY17 % US$(m) US$(m) Change Life assurance premium 13.63 11.70 17% Benefits paid and reassurance 7.70 commission expenses (5.93) (5.29) -12% 6.41 5.76 4.98 Technical re resu sult 7.70 6.41 20% FY15 FY16 FY17 FY18 Technical expense ratio 43.5% 45.2% 380bp 14 www.zb.co.zw
Reinsurance business remained flat …. Reinsurance gross premium income posted a flat outturn…. • Foreign premium contribution reduced from US$4.7m for FY17 to US$3.3m for FY18 due to the amplified foreign exchange risk on the local market. The loss was offset by increases in other local risk classes such as tobacco hail. • Claims remained at acceptable levels (5.3% increase) whilst retrocession premiums reduced by 18%, with the net reduction in cost being offset by a 336% adverse movement in technical reserves to result in an overall 6% increase in reinsurance expenses. FY18 FY17 % Net reinsurance premium income (US$m) US$(m) US$(m) Change Local premium income 15.90 14.37 11% Foreign premium income 3.26 4.73 -31% Reinsurance premium 19.16 19.10 0.3% 3.51 Reinsurance expenses (16.91) (15.92) 6% 3.18 3.03 2.25 Technical result 2.25 3.18 -29% Local premium income contribution 83.0% 75.2% 780bp Foreign premium income FY15 FY16 FY17 FY18 contribution 17.0% 24.8% -780bp Technical expenses ratio 88.3% 83.4% 490bp 15 www.zb.co.zw
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