For Africa’s second largest copper producer, Zambia, all roads lead to parliament as the MinFin Head delivers a 2022 recovery budget, but this coincides with the 3Q21 earnings season for banks which Zambia National Commercial Bank Plc shareholders will descend into the weekend with an exceptional performance of the asset backing their stock (ZM:ISIN0000000250). The largest bank by asset size and top tier in profitability in Africa’s second largest copper producer, Zanaco Plc led the commercial banking industry with a solid income leadership across all earnings lines, save forex trading, according to a 3Q21 quarterly release in the local press. The Lusaka Securities Exchange (LuSE) listed financial institution (FI) expanded its total income (adjusted for interest expenses and impairments) to K2.6 billion accounting for a 171% growth from a year ago contributing to an After tax earning (PAT) widening of 331% to new highs of K682.5 million versus a year ago.
READ ALSO: Innovation leaps Zanaco’s 1H21 PAT to new market highs
INTEREST AND EXCHANGE RATE TRADING GIVE INCOME A STRONG SPRINT
The banks lengthened duration, for risk in government securities, gave a positive cue in mark to market gains as the Kwacha yield curve flattened (or normalized) as part of the post election bond bump rally. This was part of what the Zambian markets experienced post the August polls with the government security curve compressing while the copper currency kinks provided trading opportunity in the quarter. This added a layer of margin to the interest income line in addition to balance sheet extension to key sectors of the economy. The non interest income remained strong from a strong fee and commission line performance tapping from the wider client base north of 2 million which the red bank will be celebrating 52 years this year. Foreign exchange trading earnings were fairly bullish as Zanaco perpetuates its market share in the currency trading faculty elevating total non interest income lines to just over a billion Kwacha as interest rate earnings morphed to new highs of K2.6 billion.
POSITIVE JAWS AND 40% CREDIT BOOK GROWTH
The big strong reliable bank recorded some robust milestones such as a 39.2% expansion its its credit book to K10.2 billion, the largest in the copper producer allowing it to strategically book future incomes. Offsetting the earnings momentum, was a slightly higher non – interest expense level of K1.6 billion which translated to a cost to income ratio of 57.0% compared to 78.0% same period last year.
READ ALSO: ZANACO Plc and European Investment Bank ink EUR15million Agriculture Value Chain Credit Line
THE RED BANK GOES GREEN IN THE QUEST FOR SUSTAINABILITY
The bank continues to widen its footprint sustainably across the sectors, with the most recent being K1 billion ($60 million) market debut green fund meant for financing of the SME sector while its management team prioritizes key strategic partnerships that will enable the underfunded sectors of the Zambian economy are catered to enable them contribute towards the copper producers economic recovery.
READ ALSO: Zanaco, WWF Lead Climate Resilient ‘Market Debut,’ Kukula Managed $60mln SME Green Fund
MARGIN SQUEEZE HEDGE WITH INNOVATION
In a margin squeeze environment characterized by an ebbing government security curve the LuSE listed bank has continued to lead the innovation curve with relentless efforts through its digital innovation hub allowing the bank to stay agile and afloat in an ever evolving digital savvy world while agency banking continues to increase the banks visibility with 15,000 agencies across the country. Zanaco Plc remains in contention of the first K1 billion PAT bank in the next year or two given the current performance momentum.
The Kwacha Arbitrageur
