• Insurance segment profit before tax rose from ZWG22.2 million to ZWG111.9 million
• Management-defined sustainable PAT doubled to about ZWG175 million
• Group PAT fell 42% as prior-period exchange gains largely disappeared

Harare- ZB Financial Holdings' insurance businesses has almost matched banking operations in profit before tax during the first half of 2026, producing the clearest shift in the group's earnings mix as weaker banking income was partly absorbed by stronger life assurance and reinsurance performance.

Insurance operations generated ZWG111.9 million in segment profit before tax, more than five times the ZWG22.2 million recorded in the first half of 2025. Banking operations produced ZWG112.2 million, down from ZWG504.3 million a year earlier. Investments added ZWG65.9 million, compared with ZWG87.7 million previously.

The near parity between banking and insurance is important for a financial group whose earnings were previously heavily skewed towards the bank. It demonstrates that the diversified structure is beginning to provide an earnings cushion at precisely the point when banking margins and exchange-related income have weakened.

At consolidated level, headline performance remained softer. Group profit after tax fell 42% to ZWG248.1 million from ZWG427.8 million, while profit attributable to shareholders dropped to ZWG174.3 million from ZWG357.8 million. Headline earnings per share decreased to 91.55 cents from 167.54 cents.

Unrealised exchange gains collapsed from ZWG443.8 million to ZWG19.7 million as the currency environment became considerably more stable. Total other operating income consequently fell from ZWG641.9 million to ZWG211 million.

ZB separately reported a management-defined sustainable profit after tax, which excludes unrealised exchange gains and fair-value adjustments. That measure increased from approximately ZWG87 million to ZWG175 million, more than doubling during the period.

It should be read as an adjusted management measure rather than statutory PAT, but the movement provides useful evidence that less of the group's underlying earnings base is now reliant on currency translation gains.

The insurance businesses provided much of the improvement. Insurance revenue increased 28% from ZWG422.6 million to ZWG540.7 million, while the insurance service result rose approximately 68% from ZWG66.3 million to ZWG111.5 million.

Within the portfolio, ZB Reinsurance increased profit after tax from ZWG23 million to ZWG59 million, more than doubling earnings as new underwriting business increased. ZB Life Assurance moved from a ZWG6 million loss to a ZWG38 million profit.

The Botswana reinsurance operation moved in the other direction. P&C Reinsurance's profit fell from US$527,000 to US$280,000 as higher new business required larger reserves and exchange losses weighed on earnings.

The investment businesses were also mixed. Mashonaland Holdings recorded ZWG52 million in PAT, down from ZWG64 million, while the recently launched ZB Asset Management produced approximately ZWG6 million in profit after commencing public operations in November 2025.

The group therefore has more functioning earnings engines than the headline decline in PAT initially conveys. Banking remains the largest operating franchise, however, and its performance still determines much of ZB's group valuation.

Group net interest income fell 36% from ZWG476.6 million to ZWG304.9 million. Interest income declined to ZWG494.5 million from ZWG590.1 million, while interest expense increased almost 58% to ZWG190 million.

Customer-deposit interest costs alone increased from ZWG112.9 million to ZWG164.4 million, and offshore borrowing costs rose from ZWG5.5 million to ZWG21.3 million. Interest earned on advances was broadly flat at ZWG358.6 million despite substantial balance-sheet expansion.

Fee income provided greater stability. Group commissions and fees increased about 2% to ZWG924 million, with digital-channel income rising from ZWG191 million to ZWG205.6 million.

Cost discipline also helped preserve the adjusted earnings improvement. Group operating expenses fell marginally from ZWG1.372 billion to ZWG1.359 billion, despite higher information technology, administration and security expenses. Staff costs dropped materially from ZWG703.6 million to ZWG538.8 million.

That combination, insurance expansion, stable fee income and lower overall operating costs  explains why management's sustainable profit measure improved despite the deterioration in funded banking income.

The balance sheet also expanded rapidly. Total group assets increased 21.5% to ZWG19.53 billion from ZWG16.08 billion at December. Deposits and related accounts rose almost 36% to ZWG8.92 billion, while net mortgages and other advances increased about 49% to ZWG4.62 billion. Cash and cash equivalents climbed to ZWG5.52 billion.

Liquidity remained substantial, with the consolidated liquidity ratio at 72% against a 30% statutory minimum, although it declined from 82% at December. Credit quality remains the principal complication inside that expansion.

Group non-performing loans and advances increased from ZWG852.5 million to ZWG940.1 million. Gross advances grew much faster, from ZWG3.50 billion to almost ZWG4.99 billion, which reduces the derived NPL ratio from roughly 24% to about 19%. The absolute stock of problematic credit nevertheless increased.

The concentration has moved heavily towards corporate borrowers. Corporate non-performing exposure rose from ZWG366.9 million to ZWG806.2 million, while problem exposures in small-business, consumer and mortgage lending declined substantially.

ZB's own regulatory disclosure adds weight to that concern. ZB Bank received an asset-quality rating of 4, classified as weak, an overall CAMELS rating of 3, or fair, and the disclosed risk matrix categorised overall risk as high and increasing.

Sovereign assets also require attention. The group disclosed that some Treasury bills which matured around the end of 2025 and during 2026 had not been settled and were subsequently re-issued. ZB consequently classified the Treasury bill portfolio as having experienced a significant increase in credit risk for expected-credit-loss purposes. Certain instruments were restructured at zero coupon, contributing to lower interest earnings.

The non-banking businesses carry their own regulatory tests. ZB Life Assurance ended June with a prescribed-assets ratio of 9.35% against the required 15%, although management has submitted a remediation programme to IPEC and no penalty had been imposed when the results were released. ZB Reinsurance complied with its requirement at 16%.

The group is also completing the exit from ZB Building Society, whose banking licence was cancelled by RBZ in December 2025 and which is now being liquidated under the Depositors Protection Commission.

No interim dividend was declared. ZB Financial Holdings therefore enters H2 with a considerably broader earnings base than the banking result alone would imply. Insurance has moved from a small contributor to a profit centre capable of almost matching banking operations, adjusted sustainable earnings have improved, costs have been contained and the balance sheet continues to expand. The next phase requires that diversification to be accompanied by recovery in the group's largest franchise.

Three variables now carry the greatest weight, whether net interest income recovers as the enlarged loan book seasons, whether the ZWG806 million corporate problem-loan exposure begins falling, and whether insurance can maintain its new earnings contribution without additional regulatory or reserve pressure.

If those improve together, ZB's diversified structure begins to produce a materially different earnings profile. If banking margins and corporate credit quality remain weak, the stronger insurance result will continue doing more work simply to offset deterioration elsewhere in the group.

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