Dividend expectations remain high as ISIN:ZM0000000250 (ZANACO) shareholders will be smiling their way to the next Annual General Meeting (AGM) on the back of a FY20 solid performance by the big strong reliable bank. Lusaka Securities Exchange (LuSE) listed Zambia National Commercial Bank Plc continues to build momentum as it strides to assume its rightful place in the banking ecosystem from both an asset size and profitability perspective. Full year 2020 financials reflect income leadership across almost all lines and a 48.2% rally in after tax earnings (PAT) to K343.3million supported by aggressive growth and fruits of management strategy over the years.
INCOME LEADERSHIP ACROSS THE LINES
The Lusaka Securities Exchange (LuSE) listed big strong reliable bank grew its total income by over 50% to K2.4billion compared to a year ago. This growth pulse was the highest in the market leveraging off solid performance in the interest income lines which widened 55.2% and non – interest earnings which were 48.8% stronger.
Notable contributors of the stellar income levels attained by the Zambia’s largest indigenous bank, include leadership in traditional earnings lines such as fee and income which was 49.0% stronger at K569.6million and foreign exchange trading margins which more than doubled to K377.3million.
Exceptional growth was observed in the advances book by 53.1% to K7.5billion over the last one year and double duration risk in government securities to K6.1billion explaining the 70% jump in interest income earnings under the govies trading line and 45% growth in advances income respectively.
COSTS, ELEVATED, IMPEDING EVEN HIGHER EARNINGS MOMENTUM
However, homogenous across the industry, the big strong reliable banks earnings continue to be weighed by widening non-interest expenses which perhaps reflect COVID spend, currency depreciation revaluation effect on foreign currency denominated invoices and management restructure expense as part of the banks business review. Zanaco Plc’s non – interest expenses were 52.3% wider to K1.8billion which were key drivers of the 76.0% cost to income ratio, slightly higher than the industry average.
In a year of the steepest sovereign downgrade for the copper producer, higher risk weights on sovereign exposures are likely however for level of investment in government securities of K6.1billion, a credit impairment stock of K30.3million seems contradictory if IFRS9 applied.
MUKWANDI CHIBESAKUNDA TO DRIVE PERFORMANCE HARDER IN 2021
With a change in strategic leadership at the top in 4Q20 when Mukwandi Chibesakunda assumed Chief Executive Officer role, forecast for Zanaco Plc’s in 2021 is momentum which market players eager about what the seasoned banker has under her sleeves.
The big strong reliable bank is nonetheless on track to be Zambia’s digital bank and with a fine-tune on costs, future earnings margins will propel the bank to be in contention for most profitable bank in Africa’s second largest copper hotspot.
As at 5.6pm (ZANACO.zm) stock was trading for K0.47 a share on the Zambian bourse, the LuSE.
The Kwacha Arbitrageur