After a turbulent pandemic year 2020, Zambia’s economic prospects are beginning to brighten. Standard Chartered Bank Zambia Plc (SCB) has reclaimed its traditional place in the top 4 tier earners on the commercial banking score board. According to third quarter financial statements released in the local press, the Lusaka Securities Exchange – LuSE listed entity (ZM:ISIN0000000094) grew its after tax earnings to K405.98 million (from a loss of K155.2 million a year ago). The London incorporated franchise last year gyrated between business reorganization labyrinth, as part of a global group push towards focusing on profitable markets which led to closure of some physical branches in the quest to shift to a more digital channeled service strategy. Other loss performance or margin erosion drivers in prior year included, a very cautious risk appetite stance in the wake of Zambia’s fiscal fragilities that amplified its credit risk posture from the downgrade effects.
INCOME GROWTH RECOVERY WAS SUPPORTED BY A 30% EBB IN COST POST BUSINESS REORGANIZATION
Total income grew 71.0% to slightly over a yard (K1.1 billion) supported by mark to market gains on duration risk in government securities on the interest rate trading portfolio while credit impairment write backs in excess of K111 million further propelled contribution. The post election bond bump did give interest income, a positive cue adding onto the advances contribution from the muted lending SCB ran on its book. Non interest income drivers include decent foreign exchange flows which in addition to a 30.2% ebb in year on year non interest expenses scaled SCBs margins higher. This reflected a stronger positive jaws position with sharp decline in cost to income ratio to 50.2% from 90.8% a year ago.
FUTURE READY BANKING SHIFT YET TO REFLECT CONTRIBUTION
The market remains eager to gauge the payoff of the digital strategy that underpinned closure of some physical channels in a controversial strategy to support leaner costs at a time the banks peers were consolidating their presence in outskirt towns of Zambia. With improved macroeconomic prospects in the copper producer, it is expected that SCB will ease its risk appetite in extending balance sheet to key sectors such as mining and manufacturing.
SCBs SHAREHOLDERS WILL SURELY BE RETHINKING EARLIER STANCE AS RECOVERY FLASHES ON CARDS
SCBs shareholders view on emerging and frontier market may highly likely be changing as risk appetite claws back into the temporarily depressed markets which could have triggered thoughts around potential downsizing. With improved prospects in the copper producer, Zambia’s outlook given a clearer debt redemption strategy and stronger political will post August polls, it is likely that the Standard Chartered Bank Group will take a more bullish view at their next country risk meeting to re-strategize on how to leverage off opportunity in greater risk appetite for shareholder returns second to none on the globe. Zambia continues to be in the global limelight for the right reasons ranging from a political posture to recently announced incentives for the private sector and most importantly a deal conclusion on the horizon with the Washington based lender, the International Monetary Fund (IMF) by end of November this year. The aftermath of this will be anticipated external debt restructure as early as 1Q22 as the Southern African nations seeks to restore fiscal fitness and grow the economy 3.5% in 2022 and further levitate this momentum to 10.0% in the medium to long term.
The Kwacha Arbitrageur