Currency stability to help attract foreign capital — NMB

14 Sep, 2021 - 00:09 0 Views
Currency stability to help attract foreign capital — NMB

The Chronicle

Senior Business Reporter
ZIMBABWE is poised to continue experiencing the prevailing exchange rate stability, which will in turn create a conducive operating environment for businesses and attract local and international capital.

The National Merchant Bank (NMB) made this projection in a statement accompanying financial results for the half-year ended June 30, 2021.

Since last year, Zimbabwe has been running a weekly Foreign Exchange Auction Trading System, which replaced the fixed exchange rate of US$1: Z$25.

The official auction system has seen the Zimbabwe dollar trading at 86 against the greenback as of last Tuesday.

Though trading lower than the wild parallel market rates of above 1:130, the auction platform has been credited for containing inflationary pressures, which have been on a downward spiral since the second half of last year.
NMB has, thus, stated that despite the Covid-19 pandemic there are high hopes that the containment measures and enhanced vaccine rollout adopted by the Government would result in effective curbing of the disease.

“As a group, we are optimistic that no adverse effects will significantly impact the group’s performance on account of the Covid-19 pandemic.

“We are hopeful that the exchange rate stability achieved so far will continue to prevail in order to create a conducive operating environment for businesses and the attraction of local and international capital in order to catapult the much-needed economic growth for the country,” said NMB.

The group’s total assets increased by 15 percent from Z$12,861 million as at December 31,2020 to Z$14,772 million as at June 30, 2021 mainly due to a 36 percent increase in loans and advances and other assets and a 14 percent increase in cash and cash equivalents.

Gross loans and advances increased by 67 percent from Z$2,959 million as at December 31, 2020 to Z$4,942 million as at June 30, 2021 mainly due to increased advances during the period under review in view of the bank’s growth trajectory.

Total deposits increased by 22 percent from Z$7,558 million as at December 31, 2020 to Z$9,185 million as at June 30, 2021.

This has been attributed to aggressive deposit mobilisation and the positive impact of the bank’s digital platforms.
NMB has maintained a sound liquidity position with a liquidity ratio of 44,15 percent, which was above the statutory minimum of 30 percent.

“The banking subsidiary maintained adequate capital levels to cover all risks as reflected by a historical cost capital adequacy ratio of 29,41 percent as at 30 June 2021 (31 December 2020 – 43,78 percent),” it said.

“The ratio was well above the regulatory minimum of 12 percent.”
The group’s shareholders’ funds and shareholders’ liabilities increased by five percent from Z$4,7 million in

December 2020 to Z$4,930 million as at June 2021.

The bank’s regulatory capital as at 30 June 2021 was $2,722 million in historical cost terms and was above the minimum regulatory capital of $25 million.

During the period, the banking subsidiary’s regulatory capital had exceeded the minimum of US$30 million required by December 31, 2021 on the back of the bank’s strong financial performance.

On legacy debt, the group said its banking subsidiary still owed US$13,840 million to various lines of credit providers as at June 30, 2021.

“The bank registered these foreign debts with the Reserve Bank of Zimbabwe (RBZ) as required by the regulatory directives.

“During the financial period ended 31 December 2019, the bank transferred to the RBZ the Z$ equivalent of the foreign debts at a rate of US$/Z$1:1.

“The RBZ has indicated that they will be issuing a US$ denominated instrument for these debts and consequently these debts and the RBZ deposits have been accounted for at the closing exchange rate of US$/Z$ 1:85.4234 at 30 June 2021,” it said.

“This effectively values the original credit lines at a rate of 1:1 on a netted off basis. The RBZ approved the line of credit balances amounting to US$13,840 million.”

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