HARARE – Agriculture focused financial institution, Agribank has posted a profit of $4.1 million for the half year ended June 30, 2018.
The latest results compares favourably with $2.2 million profit recorded in the same period last year, which is a growth of 89 percent.
Agribank chief executive Sam Malaba said the profit was driven by significant growth in productive sector lending especially in agriculture as well as growth in non-funded income spurred by transactions surge.
“The Bank is expanding support to the agriculture sector, and is likely to surpass its initial target pf $105 million and achieve $125 million agriculture financing, inclusive of both on and off balance sheet financing,” he said.
“To date, total lending to agriculture amounted to $80 million.”
In the period under review, Agribank’s fee and commission income at $6.3 million was 168 percent higher than $2.3 recorded in the comparative period last year driven by a surge in the volume and value of transactions processed through digital platforms.
The Bank is focusing on the upgrading of ICT systems to keep up with the increasingly competitive domestic and global banking environment.
“The stability of ICT systems is critical for survival of banks in the current environment,” said Mr Malaba.
Agribank’s loans and advances increased by 41 percent to $134.99 million during the period under review from $95.89 million as at December 31, 2017 driven by expanded productive lending especially to the agricultural sector.
Net operating income was $18.8 million, representing a growth of 11 percent compared to the same period last year, complimented by a significant reduction in non-performing loans (NPLs) which resulted in low impairment charge.
“Impairment charge went down by 43 percent to $1.9 million for the period ended 30 June 2018 from $3.3 million same period last year,” Mr Malaba reported.
“The NPL ratio was reduced from 13.81percent as at 31 December 2017 to 10.69 percent as at 30 June 2018.
“This demonstrates the Bank’s continued focus on improving the credit quality of the lending book.”
However total operating expenses grew by 11 percent to close the period under review at $12.8 million pushed by business growth initiatives undertaken by the Bank during the period.
Non-funded income grew by 82 percent to $7.1 million in the period under review from $3.9 million in the comparative period last year driven by a significant growth in customer accounts as well as transactions particularly through the electronic banking channels.
Malaba noted that the Bank is also realising positive benefits from mobilisation of cheaper retail deposits which has resulted in the reduction in average cost of funding.
“The Bank recorded a reduction of 39 percent in interest expense to close half year ended 30 June 2018 at $2.9 million from $4.8 million comparative period last year,” he said.
“The reduction in interest expense was a result of paying off $40 million Aftrades line of credit facility and replacing it with cheaper deposits.”
Agribank’s liquidity ratio at 58 percent in the period under review compares favourably with industry average and surpasses the statutory minimum requirement of 30 percent. Similarly, the capital adequacy ratio at 33.42 percent is more than double the minimum regulatory requirement of 12 percent set by RBZ.
Additionally, the Bank’s regulatory capital in period under review was $55.79 million and is above the minimum regulatory capital of $25 million.
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