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Steward Bank Reports Sharp Decline in Profitability Amid Operational Challenges

Steward Bank CEO, Mr Courage Mashavave
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Harare, Zimbabwe – Steward Bank experienced a substantial decline in profitability for the fiscal year ending February 29, 2024, with after-tax profit plummeting by 75 percent to $68 billion, down from $278 billion in the same period the previous year.

The bank’s operating income also suffered a significant drop, falling 62 percent to $2.3 trillion from $6.1 trillion recorded in the previous year. This downturn was driven by a 58.7 percent decrease in income from lending activities, a 72.8 percent drop in exchange gains, and a 90.4 percent decrease in income from fair value adjustments.

Despite these challenges, income from core banking activities increased to $789 billion, compared to $458 billion in 2023. Steward Bank attributed this growth to its focus on foreign currency transactions, a strategy that aligns with its digital-first approach aimed at reaching the underbanked population.

Steward Bank has been actively pursuing a digitalization program, earning accolades as Zimbabwe’s most outstanding digital bank. The bank introduced several digital innovations over the past year to promote digital financial inclusion. Among these is the digital banking agent portal, which enables the digitalization of agent banking services, expanding the bank’s reach across both rural and urban areas.

Chief Executive Officer Courage Mashavave highlighted the bank’s integration of Artificial Intelligence (AI) into its products, which allows for personalized services. “Some of the AI use cases include service and product recommendations on our Square mobile banking app, which makes suggestions based on transactional behavior,” Mashavave explained.

Despite the positive growth in core banking income, net interest income—a crucial metric for traditional banks—became a negligible contributor to overall operating income. Analysts have raised concerns about the bank’s long-term sustainability if it continues to rely primarily on transactional income. “Under normal circumstances, interest income should be the main revenue driver of a commercial bank; otherwise, it is just a transactional platform in the form of a bank,” stated Equity Axis.

On the cost management front, Steward Bank successfully reduced operating expenditure by a substantial 275 percent, likely due to a decrease in exchange and monetary losses. However, this positive outcome was partially offset by significant increases in staff costs (68.2 percent) and other administrative expenses (56.8 percent), trends likely driven by the hyperinflationary environment.

As Steward Bank navigates these financial challenges, its focus on digital innovation and financial inclusion remains central to its strategy, positioning it to adapt to the evolving banking landscape in Zimbabwe.