Africa Moyo, Harare Bureau
AGRIBANK has recorded a profit after tax of $7,9 million for the year to December 31, 2017, representing a 65 percent jump compared to 2016 driven by a surge in non-interest income.
Non-interest income grew by 115 percent to $10 million last year spurred by “exponential” growth in ICT based transactions.
The bank’s e-channels transactions grew by 1 800 percent during the year from 200 000 in January 2017 to 3,6 million by year end.
The surge in profit, from $4,8 million in 2016 to $7,9 million last year, makes Agribank one of the few profitable parastatals in the country.
Agribank CEO, Sam Malaba, told an analysts briefing yesterday that the bank has turned the corner.
“We are happy to be one of those State-Owned Enterprises, which has turned around and consistently recording a profit.
“As you all know, State-Owned Enterprises are closely monitored in terms of compliance with corporate governance and we are therefore pleased to produce and publish audited results with clean opinion. . .
“The bank is now profitable and going forward, will continue to expand business growth initiatives targeting both expanded lending, non-funded income and profitability growth,” said Mr Malaba.
A new law expected to govern the operations of parastatal bosses — the Public Entities Corporate Governance Bill — require SOEs managers to publish financial results and operate viably.
Mr Malaba said in the period under review, interest expense went down to $8,5 million from $9,2 million recorded in the prior year, representing an 8 decline.
The interest expense receded after the bank paid off the $40 million Reserve Bank of Zimbabwe/ Aftrade facility, replacing it with cheaper deposits.
Critically, Agribank is also realising positive benefits from the reduction in non-performing loans (NPLs), hence low loan impairment charge.
The impairment charge went down by 37 percent from $4,08 million in 2016 to $2,55 million last year. Mr Malaba said the quality of the loan book also improved considerably as demonstrated by a reduction in the NPL ratio from 21,14 percent as at December 31, 2016 to 13,81 percent by December 31 last year.
Agribank plans to end this year with a single digit NPL ratio.
The internationally accepted NPL ratio is 5 percent and below.
Meanwhile, total operating expenses grew by 8 percent to $23,97 million mainly due to business growth initiatives undertaken during the year.
Cost containment strategies yielded positive results as there was improvement in the cost ratios from the prior year, with the cost to income ratio improving from 71 percent in 2016 to 70 percent last year.
Staff costs to income ratio also improved from 33 percent in 2016 to 29 percent last year.
This is in tandem with Finance Minister Patrick Chinamasa’s directive during Agribank’s annual general meeting in March last year that they must be below 30 percent.
Said Mr Malaba: “We are happy that we were able to meet the target set by the Government that State Enterprises should not have staff costs in excess of 30 percent of income.”
Agribank finished last year with regulatory capital of $54,9 million, which is above the current minimum threshold $25 million.
But Mr Malaba says the current level of capital is inadequate for the bank to fulfil its mandate of agricultural development and of enhancing food security.
Government has allocated the bank $10 million in the 2018 national budget, a move seen by Mr Malaba as a positive step towards achieving the $100 million capital requirement for a tier 1 bank by December 31, 2020.
Agribank plans to achieve the $100 million capital level by end of this year.
Going forward, Agribank has put in place various measures to achieve the $100 million capital level, including organic growth, strategic investors from public sector, private sector and foreign investors.