Barclays Zambia credit book surges 40% underwriting future earnings as bank vies to be largest bank by asset size

According to prudential results published in the local press, Barclays Zambia’s credit book grew by an aggressive 39.5% to K5.87billion as the bank strategically booked its future earnings in its quest to be Zambia’s largest bank by asset size. Total asset base expanded 11.8% to K11.94billion.

“The growth in assets is indicative of our continued commitment to support private sector growth. Our strategy has seen us begin to extend credit to segments of the market that have been traditionally neglected by conventional lenders,” Barclays Bank Managing Director Mizinga Melu.

Credit extension and investment in government securities propelled income growth. Barclays total income grew 6% supported by a 41% rally in income from credit extension to K748.68million and a 19% increase in interest from investment in government securities leveraging off an elevated yield curve. Other drivers of the income base were an outperforming foreign exchange income line that grew 85% to K271.52million backed by 5% slow down in commission and fee income line to K284.28million.

High cost of funding and impairments weighed expense lines. The expense line was weighed by a steep impairment line that widened to K230.26million compounded by a 75% jump in interest cost on deposits to K432.83million reflecting a rising cost of funding in the financial markets.

After tax earnings ebbed 4% to K244.67million earning Barclays second place on the market profitability score board.

What the balance sheets is signaling. The Barclays balance sheet reflects not only efficiency among banks that mix local and foreign currency lending but a fairly diversified product mix across the sectors. The significant credit book growth in a depressed credit environment is very strategic in booking future earnings. The credit impairments rolled up in its balance sheet are future profit margins, if recovered, possibly in the medium term present an opportunity for write backs to the bottom line to rally earnings. This is one card the banks has up its sleeves.

Ceteris paribus Barclays remains evidently outstanding in most earnings lines ranging from foreign exchange to interest rate trading. The bank is one to look out for in the race to defying odds in a few years to come.

The Kwacha Arbitrageur