4 April 2011

Zimbabwe: Economic Stability the Key, Says Stanchart

THE current economic stability should be sustained so as to enable the banking sector to start lending long term, according to Standard Bank acting chairman, Ian Mackenzie.

Analysing the bank's financial results in which it reversed a loss of US$3,7 million in 2009 to a profit after tax of US$8,4 million in the year ending December 31 2010, Mackenzie said increased savings pursuant to economic stability would facilitate structured medium to long term lending to industry.

Zimbabwe's economic growth has, since dollarisation in February 2009, been stymied by inadequate liquidity in the banking sector, where banks are mostly lending short term on rates punitive to industry.

Standard Chartered attributed its phenomenal results to non-funded income and interest returns, with the latter arising from solid growth in the loan book. The bank's total operating income was US$43 million up from US$22,4 million. Its margins, however, remained subdued as a reflection of both competition and a realignment of interest rates to international norms.

Operating expenses increased by 1,2% to US$30,7 million from US$27,4 million, a figure the bank said was well above average inflation.

"The cost to income ratio improved from 123% in 2009 to 72% and is expected to maintain this positive trend as performance continues to improve," Mackenzie said.

Standard Chartered loans and advances grew by 132% year on year, well above market average. Total assets rose to US$281,7 million from US$269,8 million. The bank's capital, at US$32 million, exceeds the minimum regulatory capital requirement of US$12,5 million and is sufficient to meet all prudential guidelines.

"Capital adequacy ratio at 22,15% is above the prescribed minimum regulatory ratio of 10%," Mackenzie said. He said the bank will continue to leverage in markets where it has a strong presence such as China, India and South Korea. Mackenzie said the bank would continue to grow its loan book in line with prudent international credit risk best practices, which protect depositors and ensure long term viability.

An analyst this week said the banking sector was a mirror of the overall performance of the economy. He said the performance of the banking sector was progressing in line with the rest of the economy following dollarisation.

"One of the key success factors of any business is the ability to put in place strategies that speak to and resonate with any operating environment," the analyst told businessdigest.

"Continuous refinement and realignment of the strategies to the operating environment is critical to the success and growth of any bank regardless of size or sector," the analyst said.

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