Group News

P. Zimunya

Managing Director

Our 2013 results reflect the ongoing success of our strategies which have set us apart from our competitors and has provided stability throughout the past years of economic turmoil. The Bank has produced yet another set of good results against a difficult operating environment.

Financial Sector Developments

Despite the broader economic constraints, the banking sector remained largely stable throughout the year. However, the tight liquidity conditions have seen restricted banking sector lending and high lending rates.

In March 2013, the banking sector and the Reserve Bank of Zimbabwe signed a Memorandum of Understanding (MOU) which put a cap on service charges and interest rates. The MOU was not extended after it expired in October 2013. However, for the greater part of the year banks were adversely affected as no interventions could be effectively carried out on the revenue side while operating and funding costs increased. This put considerable pressure on the Bank’s earnings. The current initiatives to revive the interbank market and restore the RBZ lender of last resort function as indicated in the 2014 National Budget Statement and the 2014 Monetary Policy Statement will go a long way in improving liquidity and stability in the local banking sector.

CBZ BANK PERFORMANCE

Financial

Despite a year in which income initiatives were adversely affected by the MOU and the cost of funding was relatively higher due to tight liquidity conditions, all of which placed significant pressure on earnings, the Bank attained good results achieving significant asset and deposit growth.

Below is an overview of key performance highlights

Operational Review

CBZ Bank’s strategic operating business units are Treasury, Corporate Banking, Retail Banking, Investment Banking and Structured Finance, and Mortgage Finance. Below is an analysis of the key developments that have taken place under the key units:

Treasury

The Treasury Division was active in mobilising funding and managing the Bank’s overall liquid resources. This has seen treasury trading income increasing by 48% from the prior year position. The Bank’s money market investments have also increased significantly from the previous year. This went a long way in ensuring that the Bank remained liquid throughout the year.

Corporate Banking

Credit quality enhancements and deposit mobilisation were some of the key initiatives in 2013. This resulted in overall improvement in the quality of the Bank’s loan book and a 22% growth of corporate deposits.

Retail Banking

The year 2013 saw exciting and significant developments within the Retail Banking Division. The Bank officially opened its Wealth Management Centre in Pomona, Borrowdale. The centre houses CBZ Asset Management, Borrowdale Branch and Wealth Management Suite. This has provided a one stop financial services shop for our clients.

The Bank also expanded its card services footprint on the VISA brand through the acquisition of VISA POS merchant acquiring business. A MasterCard project is also in the pipeline and it is expected to be rolled out in 2014. Furthermore, the Bank is promoting the use of electronic banking and card products in an effort to decongest banking halls and improve customer service. In line with this strategy all manual withdrawals by individual clients are expected to be phased out during the year 2014.

The Bank scored a first in Zimbabwe by launching the first in store ATMs in the country in partnership with Spark ATM Systems, a South African based company. In store ATMs totalling 45 have been deployed to date. The CashPlus savings product introduced in 2012 continued to grow significantly, registering a growth of 122% in 2013.

The CashPlus family is a range of savings products offering competitive interest rates ranging from 4 to 8%. The Bank’s initiative to mobilise savings deposits and provide value to the retail customer is proving to be a success and more growth is expected from this product.

Investment Banking and Structured Finance

The Advisory Services Division has been engaged in various mandates in 2013, with advisory work on the disposal of the Astra shares held by the Finance Trust of Zimbabwe being one of the notable ones. The Trade Finance arm has also concluded various credit line transactions, for both the Bank and on behalf of our clients.

Mortgage Finance

Land development and development of low to medium cost residential houses and stands continued to be undertaken in the year such as the Nehosho Housing Project Scheme. The Bank expects to increase its mortgage book as developed properties become available for sale. The Bank has continued to lend mainly under the employer assisted housing schemes, CashPlus Housing product and on properties owned by the Bank. The Bank has also invested into a land bank whose value will be unlocked in the long term as mortgage finance initiatives continue. This is also against a background of the tax exemption to receipts and accruals of mortgage finance revenue as highlighted in the 2014 National Budget Statement.

Capital Adequacy

The Bank is above the target regulatory capital of $100 million with which compliance has been extended to the year 2020 from the previously set deadline of June 2014. As at 31 December 2013 the Bank had a core capital of $152.3 million.

Risk Management

The Bank has adequate systems and processes to effectively measure, monitor and control the risks which it is exposed to. Overally, the Bank’s risk is managed through an enterprise-wide risk management structure Risk Management processes within the Bank start with individual departmental identification of risks under their respective process flows and subsequent classification of the risks into:-

• Risks that can be avoided or mitigated by simple business practices and are provided for in approved procedures,
• Risks that can be transferred to other participants as in underwriting arrangements and insurances, and
• Risks that must be actively managed using bank resources, through a combination of line management and risk management department actions.

The general philosophy of the Bank is to segregate risk generation functions from approval and oversight functions in all activities carried out. To this end the Bank has created an independent risk management function which is independent of the risk-taking function. This is necessary in order to achieve objectivity in the area of risk evaluation. This function facilitates the identification, measurement, monitoring and control of various risks in all units.

Credit Rating

The Bank maintained the A+ long term credit rating as rated by the Global Credit Rating Company of South Africa (GCR) for 2013. The Bank was also awarded an A1 short term credit rating by GCR for the same period. The rating outlook for the Bank has been designated as stable. This is a show of confidence on the Bank’s sustainability and ability to meet both its short-term and long-term commitments.

Positioning

The Bank continues to be a pacesetter in its area of operations enjoying a market share of 22% and above, across all the key metrics. The Bank received the following accolades in 2013:

1. “2013 Banking Sector SuperBrand” by the Marketers Association of Zimbabwe;
2. The Financial Sector Investor of the Year (2013) by the Zimbabwe Investment Authority;
3. The ZIMRA Highest Dollar Value Contributor (Domestic Taxes) Award;
4. The Banks and Banking Survey 2013 2nd Runner Up; and
5. The Financial Institutions Award (Gold Category 2013) by Afreximbank.

Corporate Social Responsibility

The Bank plays a broader role in the communities in which we live and operate beyond what we deliver through our business activities. We do this through programmes designed to invest back into the community and through direct efforts and our own staff. The following are some of the activities the Bank was involved in:

• Sponsorship towards the refurbishment of Mashava Campus at Great Zimbabwe University;
• Lupane State University fundraising;
• Sponsoring the Bindura University first international Science and Mathematics education Conference
• Construction of the visitors waiting area and benches at South Medical Hospital;
• Donation towards the hosting of an annual medical research forum by the Medical Research Council;
• Donation to the Zimbabwe women national football team and
• Replacement of collapsed ceiling at Chitungwiza Central Hospital.

Outlook

The government of Zimbabwe developed a 5 year economic blueprint titled the Zimbabwe Agenda for Sustainable Socio- Economic Transformation (Zim Asset) which is scheduled to be in implementation up to December 2018. The economy is expected to grow at an average rate of 6.7% over the 5 year period with the peak being at 9% in 2018. The availability of clear and consistent policies augurs well for economic growth going forward. The extension of the capitalisation deadlines also provides opportunities for profitable re-deployment of excess capital and therefore growth to the Bank’s earnings. It is against this background that the Bank will continue to enhance value preservation and growth strategies in the coming year, including the improvement of credit quality, liquidity management and earnings diversification.

Appreciation

My sincere gratitude goes to our clients, the Board, management, staff and all stakeholders, without whom the Bank would not have been able to achieve the above performance.

PETER ZIMUNYA
MANAGING DIRECTOR