Standard Chartered Bank Zimbabwe Limited’s rating reaffirmed
GCR has reaffirmed Standard Chartered Bank Zimbabwe Limited’s (“Stanchart”) long term domestic Z$ currency rating of AA- (double A minus). However, the rating has been maintained on rating watch. Stanchart is one of the largest banks in Zimbabwe with a strong domestic franchise underpinned by its international brand name. The level of technical and financial support offered by the bank’s parent company, coupled with the ability to leverage off the strong brand name, was favourably considered. However, uncertainty surrounds the implementation of the Indigenisation & Empowerment Act promulgated in March 2008, which requires foreign owned firms to cede a majority shareholding to locals. It is not yet clear how this will impact the bank’s shareholding structure or how it will be implemented, introducing a degree of uncertainty going forward.
Stanchart enjoys substantial financial flexibility, with its strong brand supporting its perceived “safe haven” status among depositors. Notwithstanding this, the bank has not actively pursued deposit growth post dollarisation, resulting in a substantial loss in market share. Stanchart’s market share of customer deposits dropped to roughly 8.6% in F10, from 15.8% in F09. Total deposits contracted by 0.4% to US$223m as at FYE10. Liability generation initiatives have been impacted in part by own resource lending limits placed by the parent company due to perceived high country risk. The absence of alternative high yielding assets has further dampened incentives to grow deposits. Consequently, the bank has deliberately focused on maintaining key client relationships and capital adequacy rather than asset accumulation.
The bank is well capitalised with a total risk weighted capital adequacy ratio (“CAR”) of 22% as at FYE10 (FYE09: 21%). Total capital & reserves grew by 35% to US$31.9m in F10, bolstered by retained profits. On the back of a highly selective loan policy, the bank’s asset quality has remained relatively sound, while its provisioning policies are considered to be conservative. The bank had no non-performing loans as at FYE10. Stanchart recorded a NPAT of US$8.3m for F10, from a loss position in F09. The performance was driven by non-interest income, which contributed 85% of total operating income (F09: 92%). Operating costs remain high, with the cost/income ratio closing the year at 72%. Liquidity risk appears well managed, with the bank posting a liquidity ratio of 62% in F10 against a statutory minimum of 20%.
Jennifer Mwerenga https://globalratings.net/uploads/files/May_2011.pdf
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