HARARE- ZB Financial Holdings, which operates one of the 16 commercial banks operating in Zimbabwe has reported that its investments securities realised a $16.7 million gain in the first 6 months period of the year when compared to the same period last year.
Overall the company’s investment securities portfolio grew from $56.5 million at the end of the first half period of the prior year to $93.4 million as at the end of the June 2019, a 65% growth.
In a statement accompanying the group’s half year earnings the group’s chairman said “The group benefited from movements on the Zimbabwe Stock Exchange, recording a fair value gain of $16.7m at the end of June 2019, a significant movement against a loss of ZW$0.1m in the corresponding period in 2018”
Most companies hold investment securities on their balance sheet as asset and these mainly include equities, listed or otherwise. The rationale is always to maximise shareholder value through sweating of financial assets which would otherwise be lying idle on the company’s books or distributed as dividend.
In the first 6 months of 2019 the ZSE’s mainstream index recorded a 40% positive return with much of the gains coming from the second quarter period of the year. in the first quarter the ZSE actually realised losses of -16.8% on profit taking before the second quarter recovery.
The official de-dollarisation of the economy at the end of February triggered an upward rerating as the exchange rate weakened in favour of the USD. Retention of the USD as the official currency meant most counters and the average market was now overvalued in USD terms, a factor which could have led to first quarter losses. -21 +36
Despite the positive performance in ZBFH’s investment securities portfolio in line with the surge in stock market fortunes, the return however comes short of beating inflation. Inflation, which began the year at 46% closed the first half period at 176%.
Most investments within Zimbabwe are however presently lagging inflation and it has become difficult to identify asset with inflation beating returns. In August regional financial services group, Old Mutual began accounting for Zimbabwe as a hyperinflationary economy.
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