GCR upgraded CBZ Bank Limited’s (“CBZ”) long-term naional scale US$ rating to A+ (Single A plus), which is one notch up from the previous rating of A (Single A). CBZ is a wholly-owned subsidiary of CBZ Holdings Limited (CBZH), which was incorporated in June 2005. The largest shareholders include the government of Zimbabwe with 16.1%, followed by Libyan Arab Foreign Bank (14.1%), Renaissance Capital (13.6%) and NSSA (10%). CBZ offers a wide range of commercial banking products and services to the retail and corporate markets. CBZ is the largest commercial bank in Zimbabwe, having gained significant market share, with its major competitors continuing to adopt a cautious approach to asset accumulation. Being partly government owned has benefited business flows.
The bank enjoys substantial financial flexibility, with its strong brand and local listing supporting its perceived “safe haven” status among depositors. The bank continued to be a major beneficiary of deposits post dollarisation, reflecting a considerable increase in its depositor-funding base during F10. The bank has also benefited from strategic alliances with the corporate sector and its ability to source government deposits through parastatals and ministries. Supplementing depositor funding, CBZ has secured off-shore lines of credit from the African Export-Import Bank and PTA Bank totalling US$70m as at FYE10.
On 1 April 2010, the Group announced its plan to merge CBZ Building Society (“CBZ BS”) with the bank as part of a process to rationalise operations and maximise profitability. To date, although the bank and society have been operationally integrated, management are required to maintain separate financial statements pending conclusion of legal & regulatory procedures. CBZ BS’ capital base amounted to US$24.8m as at FYE10, which would take the bank’s capital to US$80m. This will augment the bank’s total risk weighted capital adequacy ratio, which at 11% as at FYE10, was only slightly ahead of the regulatory minimum of 10%.
Notwithstanding exuberant credit growth, asset quality remained sound, with gross non-performing loans (“NPLs”) declining to 0.4% of gross loans as at FYE10. Provisions were raised in line with prudential guidelines. Crucially, however, given the short-term nature of deposits, the relatively high loan/deposit ratio should be carefully monitored. Further, cognisance must be taken of the potential lag in arrears experience following a period of rapid loan growth. NPBT registered a robust 152% growth in F10. The performance was driven by non-interest income, which contributed a higher 63% (F09: 51%) of total operating income on the back of higher transaction volumes. The bank’s liquidity ratio declined to 26% as at FYE10 (FYE09: 37%), although remaining above the new prudential minimum of 20%. Notwithstanding this, liquidity risk remains a major challenge for Zimbabwean banks due to inadequate market liquidity, the limited capacity of the central bank to act as a lender of last resort and the lack of a functional interbank market.
Jennifer Mwerenga https://globalratings.net/uploads/files/Aug_Insights_2011.pdf
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