• Steward Bank records a 223% increase in operating profit to ZWL$ 25.8 billion
  • The company recorded an increase of 385% in profit before tax to 6.3 billion and a 64% liquidity ratio above the minimum regulatory ratio of 30%
  • The Bank satisfies  the key financial soundness indicators issued by RBZ
  • The Bank have a positive financial growth outlook with increased operational risk.

Steward bank, Zimbabwe’s largest bank by depositors and a subsidiary of Eco Cash holdings Limited continues to get escalating 3-figure growth rates since 2019 with the latest growth rate of a 223% jump to ZWL$ 25.8 billion in operating profit for the half-year ended 31 August 2022.

During the financial instruction’s operating period, the Zimbabwe dollar succumbed by 77% to the United States Dollar while deficits doubled on the parallel market. The Zim dollar also experienced its record fall per day in 2022 when it plunged 33% in a week. The reserve bank increased the reserve requirement ratio to 10% and plunged the interest rate to 200%. Furthermore, official bank lending was partially banned which negatively impacted the revenue figures for the sector.

Despite all these unusual business environment turn-ups, the Ecocash Holdings subsidiary sailed through and produced stellar records in the half-year under review. The sector itself has been accused of being the major driver of recently escalating inflationary pressures and to curb inflation, the regulator repeatedly toyed with every instrument at their disposal and continuously added more operational risk to every bank.  

The company recorded an increase of 385% in profit before tax to 6.3 billion and a 64% liquidity ratio above the minimum regulatory ratio of 30%. At the same time, the leading financial institution’s net interest income soared to 219% from 2.7 billion realized in 2021. The robust shift in the earnings of the company has been directed to the strategized business model. The company launched several services and products in the period under review. Among others was a mobile Banking Application for Foreign Currency which digitalized all local FCA customers.

Mobile Banking Application for forex application is an instant FCA Nostro offering two choices, either Dura-Lite or Dura Gold account. “The new system was enacted to accommodate 4IR Banking technologies and trends such as automation and artificial intelligence which for the half year in review, have enabled the Bank to successfully grow its digital bank revenue, customer base and competitive stance”, says the chairman’s report. These accounts alone made the revenue of ZWL$10 billion as exchange gains. This was achieved through a mass marketing approach where the charges for transacting made the majority shift to the digitalized platform.

The financial soundness of the deposit bank is also greatly supported by a 160% jump in account maintenance cost to ZWL$1.12billion from ZWL$432 million in the comparative period last year. The loans and advances to customers for the period were also ZWL$4,8 billion, a 125% jump from a comparable period in 2021.

Because of the enhanced business model, coupled with a well-priced strategic mobile banking charge, net interest income soared to ZW$6.0 billion from ZW$2.7 billion, registering a 119% increase over the comparative year. The company’s total equity escalated by 29%, making a 54c dividend per share.

Being in a competitive industry of 19 banks, the industry average liquidity ratio for the period under review was 62.16%, which is 2% and 34% upsides for the bank from the industry average and minimum regulatory liquidity ratio respectively. These double upsides in liquidity have made the going concern and competitiveness of the commercial bank. The risk profile of the bank under review shows sustainment for the projections however, there is a lot of uncertainty for the sector as the monetary policy committee is committed to experimentally altering monetary policy tools to reduce this highly liquid industry. The recorded bank deposits for the industry were ZWL$1.12 trillion a 92% jump from the ZWL$582.26 billion recorded in March 2022.

Steward bank made a return (ROA) on assets of 8% for the half-year under review. Comparing this with the industry average of 8.67% ROA, analysis shows that there was equally efficient utilisation of assets by the company to match the industry average. However, the company’s return on equity of 18.46% has shown a 13.14% downside from the industry average of 31.6%, putting dark spots in the management’s handling capability of shareholders’ funds. For this Ecocash Holdings subsidiary, a thorough review of the shareholder’s funds can erase these dark spots and put on the legacy mask with the industry’s big boys.

The non-performing loan ratio aspect, which is used to measure the ratio of the banks’ non-rewarding loans to total loans, is 2.3% for the bank which is a jump from the historical of 5% in 2018. This has given reflection of a strong credit risk management for the company. On the contrary, the industry’s non-performing loan ratio has also been reduced to 1.55% giving a downside to the steward bank of 0.75%. This only curves our perspective of the company despite having the bank diverged from the regulatory non-performing loan ratio of 5%. This competitive urge for the banking sector players is putting a need on the institution to further stretch operational dynamics.

 Steward bank also recorded a 37% jump in the capital adequacy ratio to 68% from 31% recorded in the comparable period in 201. This reflects a strong financial position for the company to honour its financial obligations. The institution is operating 56% percentage points above the minimum regulatory benchmark of 12% which is clear evidence that there is the best business model in play. To add, the bank is also operating with an upside of 34.13% from the industry average of 35.16%

We project that Steward bank is most likely to take on market leadership in the future. However, the forecast figures largely depend on the central bank’s standing on the monetary policy instruments.