Zimbabwe’s stuttering economy takes toll on Nedbank

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  • Group’s HE declined by 7%
  • Nedbank Zimbabwe HE down by 23%
  • Nedbank Zimbabwe registered monetary loss of R296 million
  • Zimbabwe’s weak economic fundamentals also weighed on SADC business performance

Harare – Nedbank Group’s financial performance fell flat for the year ended 31 December compared to the previous year owing to Zimbabwe’s economic ills.

In the results publication the Group said, “Nedbank Group’s financial performance was below expectations as headline earnings declined 7,3% to R12,5bn.”

Nedbank attributed the headline earnings decline to hyperinflation in Zimbabwe and private equity revaluations.

During the period under review, Zimbabwe had been grappling against inflation for the greater part of the year which inevitably resulted in the nation entering into stagflation.

In June of 2019, Zimbabwe transitioned from a multi-currency to a mono currency Zimbabwean dollar system which resulted in hyperinflation eroding the value of the ZWL.  Year on year inflation had reached 521% in December 2019, consequently further eroding the value of the Zimbabwean dollar against the rand.

Nedbank Zimbabwe registered a R108 million HE loss in 2019, indicating a 23% decline from the R142 million profit recorded in the prior year.

Broadly, the Southern African Development Community (SADC) subsidiaries’ performance was impacted by persisting macroeconomic pressures across the region especially in Zimbabwe.

“Our SADC subsidiaries’ performance was impacted by several unusual items. Policy uncertainty, increased government expenditure and a lack of foreign direct investments have severely damaged the Zimbabwean economy, contributing to hyperinflationary conditions.

The SADC region recorded a HE loss of R20 million, a 94% plunge from the prior comparable period largely driven by losses in Nedbank Zimbabwe and an impairment of legacy debt of R44 million in Zimbabwe.

Africa Regions’ HE also contracted by 35,0% to R457m and ROE declined to 7,7% mainly due to hyperinflation accounting in Zimbabwe implemented from 1 July 2019.

Owing to hyperinflation, Nedbank Zimbabwe recorded a net monetary loss of R296 million.

The banking and economic environment deteriorated on a global landscape and financial market volatility increased and persisted for much of 2019.

“International investors became more risk-averse on growing fears of a global recession as the evidence of slower growth in many countries accumulated.”

On the brighter side, in a bid to drive digital and transactional business, the Group successfully launched the mobile banking solution in November 2019 in Zimbabwe.

The group alluded that operating in Zimbabwe remains challenging as policy uncertainty, increased government expenditure and a lack of foreign direct investments have severely damaged the Zimbabwean economy contributing to hyperinflationary conditions.

This has then forced Nedbank to reconfigure the shape of balance sheet and business operations as a way of adapting to market changes.

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