Agribank's net income is improving, an indication of the financial institution's stability as it can meet its operating expenses from interest, a recent survey has revealed.
According to the 2017 Zimbabwe Banking Sector Review (ZBSR), a product of Alpha Media Holdings (AMH), Agribank's net interest income to operating expenses ratio sits at 92%.
Agribank sits just behind Ecobank (152%) and FBC (14%) on the rankings.
"This ratio (net interest income to operating expenses ratio) reflects the ability of the entity to meet the operating expenses from the interest earned," the ZBSR report, compiled by a consultant on behalf of AMH, said.
"Any figure below 100% means that the bank has to either earn some non-interest income to bridge the gap or face the losses that would be incurred," the report added.
Net interest income is defined as "the difference between the revenue that is generated from a bank's assets and the expenses associated with paying out its liabilities".
It is the core source of revenue for a bank.
The improvement was seen in Agribank reducing its interest expenses by 8% in the financial year ending December 2017.
"On a positive note, the bank recorded a year-on-year reduction of 8% in interest expense from $9,2 million in 2016 to close 2017 at $8,5 million," Agribank said in a statement accompanying its results.
"The reduction in interest expense was a result of paying off a $40 million Aftrades facility and replacing it with cheaper deposits."
Agribank now wants to focus on growing its loan book by targeting the recovering agriculture industry.
"Going forward, the focus will be on growing and maintaining a sustainable quality loan book, especially agriculture-related book plus enhancing non-funded channels related to income," the bank added.
During the period under review, Agribank's non-funded income grew by 115% to $10 million from $4,7 million earned during the same period in 2016.
This growth led to 65% in profit after tax to $7,9 million from $4,8 million in 2016.
Agribank's situation is expected to improve even further after it was removed from the United States' sanctions list.
The agriculture-focused bank is targeting to achieve a capital base of $100 million by 2020 in line with the Reserve Bank of Zimbabwe capital requirements.