• Mortgages and advances increased 78% to ZWG5.52 billion, while lending income declined 3.2%
• Profit after tax fell 31% to ZWG420 million, despite stronger underlying earnings and lower operating expenses
• Sustainable profit rose to ZWG215 million, as ZB expands lending and reduces reliance on valuation gains

Harare- ZB Financial Holdings has recorded a 78% increase in mortgages and other advances to ZWG5.52 billion during the nine months ended 30 September 2026, although profit after tax declined 31% to ZWG420 million.

The performance reveals a significant disconnect between credit expansion and earnings generation, with the enlarged loan portfolio yet to translate into stronger interest income. The group is also undergoing a shift in its profitability structure, with earnings increasingly supported by core operations as the contribution from exchange gains and fair value movements diminishes.

In a trading update, revenue declined approximately 10% to ZWG2.57 billion from ZWG2.86 billion in the corresponding period, while profit after tax fell from ZWG610 million to ZWG420 million. The group reported that sustainable profit, excluding exchange gains and fair value movements, increased from ZWG40 million to ZWG215 million. Operating expenses declined marginally to ZWG2.07 billion from ZWG2.09 billion, indicating that the earnings contraction was driven primarily by weaker revenue rather than an increase in the operating cost base.

The results extend a trend already evident in the half year financial statements, when Chairman A. Makamure reported that profit after tax declined to ZWG248 million from ZWG428 million, while sustainable profitability improved from ZWG87 million to ZWG176 million. The nine month figures indicate that underlying earnings have continued strengthening, although their contribution remains insufficient to offset the reduction in other income sources.

ZB's balance sheet expanded considerably during the reporting period, with total assets increasing 28% from ZWG16.08 billion in December 2025 to ZWG20.53 billion at the end of September. Mortgages and other advances reached ZWG5.52 billion, compared with approximately ZWG3.10 billion at the beginning of the year.

Customer deposits and other accounts increased 52% to ZWG9.96 billion, while cash and short term funds rose 47% to ZWG5.93 billion. The combination of stronger deposit mobilisation and credit expansion indicates improving financial intermediation capacity, although the earnings contribution remains constrained.

Net income from lending activities declined 3.2% from ZWG638 million to ZWG617.8 million, despite the substantial increase in the closing loan portfolio. The divergence raises questions about lending yields, the timing of credit deployment and the relationship between interest earned on loans and funding costs.

The figures cover different measurement periods, with loan balances compared against December 2025 and lending income measured against the corresponding nine months of 2025. Consequently, the decline cannot be attributed directly to weaker loan pricing without additional information on average advances, funding expenses and interest margins.

The group's disclosed net advances represented approximately 55.4% of customer deposits and other accounts at September, compared with an estimated 47.3% at December 2025. This indicates greater deployment of customer funding into lending, although the consolidated figures do not establish the regulatory loan to deposit ratio of ZB Bank Limited.

The broader earnings opportunity lies in increasing the income generated from the existing credit portfolio while preserving loan quality. The Reserve Bank's policy rate reductions from 35% to 27.5% during 2026 may support credit demand, although repricing of loans and deposits will determine the effect on interest margins.

The improvement in sustainable profit represents the more encouraging development within ZB's latest results. Excluding exchange gains and fair value movements, sustainable profit increased to ZWG215 million from ZWG40 million, an improvement of approximately ZWG175 million. This represents more than five times the comparable figure, suggesting that recurring business activities are becoming a more substantial source of profitability.

The distinction matters because exchange gains and fair value adjustments can create significant accounting profits without equivalent improvements in the underlying banking franchise. Their contribution also depends on currency movements and valuation assumptions that may not recur consistently.

The group reported profit nevertheless declined by ZWG190 million, demonstrating the considerable influence of those income sources on previous earnings.

An examination of the half year and nine month figures provides further insight. Sustainable profit increased from ZWG176 million in June to ZWG215 million in September, implying approximately ZWG39 million of additional sustainable earnings during the third quarter. The comparable 2025 disclosures imply a negative contribution during that quarter, although the figures are rounded and the group has not supplied a detailed quarterly reconciliation.

This suggests an improvement in underlying profitability during the latest quarter, even as cumulative statutory earnings remain below the previous year.

The commercial challenge is sustaining that recovery through stronger funded earnings, fee generation and insurance contributions rather than depending on fluctuations in financial asset valuations.

Meanwhile, nonfunded income continued to provide a substantial portion of its revenue. Commissions and fees amounted to ZWG1.386 billion, almost unchanged from ZWG1.382 billion in the corresponding period. The limited growth suggests that transactional income has largely stabilised, increasing the need to generate additional revenue from lending and other financial services activities.

Net insurance and assurance income increased approximately 16% to ZWG133.8 million from ZWG115.2 million, supported by new business and increased participation.

The insurance contribution remains relatively small compared with commissions and fees, indicating that banking and transactional activities continue to dominate the group's earnings structure.

The continued reliance on fee income also exposes ZB to changing regulatory and competitive conditions. Zimbabwe's restrictions on banking charges have increased pressure on financial institutions to develop alternative revenue sources, including lending, asset management and more effective use of existing customer relationships.

Operating expenses declined approximately 1% to ZWG2.07 billion, indicating that cost containment contributed to protecting profitability. The group's reported cost base remains substantial relative to revenue, reinforcing the importance of improving income productivity without allowing additional credit growth to generate disproportionate operating and impairment expenses.

Total assets increased by approximately ZWG4.45 billion during the first nine months, supported by growth in customer deposits, lending and liquid investments.

Cash and short term funds reached ZWG5.93 billion, representing approximately 59.5% of reported customer deposits and other accounts. This provides an indication of the group's substantial liquid asset holdings, although the figure is not equivalent to its regulatory liquidity ratio.

The combination of expanded lending and stronger liquidity creates opportunities to improve asset returns through disciplined credit deployment. Lending to customers with reliable cash flows could strengthen net interest income, provided the returns compensate for funding costs, credit risk and capital requirements.

ZB Bank's loan growth is occurring alongside changes to the group's broader structure. The half year financial results confirmed that the building society was undergoing liquidation following the Reserve Bank's approval of the cancellation of its banking licence in December 2025, with the Deposit Protection Corporation administering the process.

The restructuring places greater importance on the earnings productivity of the remaining banking and insurance operations. The third quarter update does not provide sufficient segment information to isolate their respective contributions to consolidated profit.

The absence of detailed disclosures on impairment charges, nonperforming loans, funding costs and average lending yields also limits a comprehensive assessment of the quality of the credit expansion. These measures will become increasingly consequential as the enlarged portfolio matures.

Therefore, ZB's latest performance presents an improving underlying earnings position alongside weak reported profitability. Sustainable profit has strengthened considerably, while revenue and net lending income remain under pressure. The 78% increase in advances provides a larger earning asset base, although its financial contribution has yet to become visible in net interest income.

The next phase of execution should focus on improving returns from the enlarged loan portfolio, particularly through disciplined credit pricing, stronger utilisation of customer deposits and tighter management of funding costs. The group's substantial liquidity also requires productive deployment without compromising the capacity to meet customer obligations.

Compared with CBZ Holdings and NMBZ, which also reported substantial lending expansion during the first nine months, ZB's distinction lies in the decline in funded earnings despite the acceleration in credit. The group's improvement in sustainable profit provides evidence of progress, although stronger interest income will be necessary to establish a more durable earnings recovery.

No dividend was declared for the third quarter, preserving resources as the group expands its balance sheet and continues restructuring its operations.

ZB has demonstrated capacity to grow credit, attract deposits and contain operating expenditure. The commercial priority is converting that expansion into stronger recurring earnings while reducing exposure to volatile valuation gains. Its financial performance will be more convincingly assessed when increased lending produces measurable improvements in net interest income, credit quality and returns on equity.

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