CABS most profitable bank, posts US$113m net income

CABS recorded a net income of US$113 million in the full year to December 2017, making it the most profitable entity of all the banks operating in the country, a survey by the Zimbabwe Independent has revealed.

By Kuda Chideme

This is income after factoring the interest expense and other income, but before operating costs.

CABS is a wholly-owned subsidiary of the Zimbabwean unit of Old Mutual financial services group.

The bank’s interest income amounted to US$91 million, ranking second only to CBZ, which generated US$138 million.

Profit after tax (PAT) amounted to US$42 million. Generally all but one entity in the entire financial sector made profits during the period under review. National Building Society (NBS) incurred a loss of US$1 million as it is fairly new and still building up its portfolio.

In terms of asset base, the bank is considered to be the third largest with US$1,267 billion of the sector’s US$10,5 billion.

The biggest bank by asset base is CBZ (US$1,992 billion) followed by Stanbic (US$1,403 billion) and StanChart, which is ranked fourth at US$816 million. The four banks account for 52% of all bank assets.

Mid-tier banks by asset base are FBC (US$558 million), Barclays (US$556 million), Ecobank (US$547 million), BancABC (US$530 million), Steward (US$461 million), ZB Bank (US$442 million) and NMB (US$423 million). The smallest bank by asset base is ZB Building Society with a modest US$42 million.

CABS accounts for 12,16% of the industry’s total US$8,6 billion deposits which translates to US$1 billion.

As at December 2017 a total of US$3,454 billion loans were in issue with CABS accounting for US$669 million and ranking second after CBZ with US$807 million.

The two banks account for nearly 43% of all the loans in issue.

CABS has the third highest deposits-to-loan ratio at 64%. This ratio depicts the percentage of deposits that have been issued as loans. Building societies are expected to rank highly in this regard as their core business is mainly issuing of mortgage loans.

FBC Building Society came first with a ratio of 82% followed by NBS (70%) and CABS at 64% respectively.

Banks such as Stanbic (27%), Barclays (25%), StanChart (22%) and Steward (10%) indicate a huge cautious approach to lending given their significant deposits.

CABS is holding on to US$187 million worth of government securities which, when expressed as a percentage of deposits, comes out at 18%.

The survey also showed that out of all the 18 banks, CABS has the lowest capital adequacy ratio at 17%. Capital adequacy gives an indication of the bank’s ability to absorb some of the losses that might occur without jeopardising depositors’ funds.

The Reserve Bank of Zimbabwe-recommended minimum ratio is 12% of the risk weighted assets, and all banks met this requirement as at December 31, 2017.

The capital of a bank consists of three categories or tiers, with tier 1 being the shareholders’ equity and retained earnings. Tier 2 normally consists of reserves such as revaluation, general loss and undisclosed, and tier 3 includes a variety of debt and is taken to support tier 2. Subordinated loans are a main feature in tier 3 capital.

NBS leads the pack with 101%, followed by Steward (67%), FBC BS (57%) and ZB BS (55%). Mid-ranking banks in this category are Ecobank (42%), StanChart (39%), Agribank (38,57%), POSB (33%), Nedbank (31%), Barclays (28%), CBZ (27%), ZB Bank (26%), Stanbic (25%) and NMB (24%).

The bottom ranked banks in terms of capital adequacy are BancABC (21%), Metbank (20,7%), FBC 18% and CABS with 17%. — Zimbabwe Independent