Financial services provider, GetBucks Microfinance Bank Limited, borrowings have gone down by 40 percent, reflecting a reduction in funds available for deployment into the loan book, the financial institution’s latest trading results indicate.
While most banks have continued to post profits, they are trading in an unstable operating environment, characterised by high inflation and a weak exchange rate.
In a statement accompanying audited condensed financial statements for the six months ended 31 December 2019, GetBucks Microfinance Bank Limited board chairman, Rungano Mbire, did not paint a rosy picture of their operating results.
“Borrowings reduced from ZWL$78 million to ZWL$47 million reflecting real reduction in funds available for deployment into the loan book,” said Mbire.
“The 40% reduction is reflected in adverse movement in bottom line as the income statement moved from a ZWL21 million profit in prior year to a ZWL20 million loss in current year. This was predominantly a result of a ZWL10 million net monetary loss as the bank’s assets are predominantly monetary. In historical terms the bottom line increased by 64% to ZWL18.7 million.”
The bank has since changed its financial year-end from June 30 to December 31, meaning the latest six-month financial results are for the year 2019 and December 31 is now the year end henceforth.
The bank’s operating expenses however fell by 54% which is because of the fact that current financial period is 6 months yet prior was 12 months.
“The latter is coupled with reduced activities in order to curtail costs,” explained Mbire.
GetBucks also registered a significant increase in deposits during the period under review.
“Customer deposits increased by 40% to ZWL$12.7 million (PY: ZWL$9.1 million),” Mbire said.
“Total assets reduced by 36% to ZWL$132 million (PY: ZWL$205 million) with the biggest source of reduction being loans and advances to customers which saw a 68% reduction. The 36% reduction in total assets reflects the fact that the bank’s capital preservation strategy was not able to fully preserve shareholder value at a higher rate than inflation.”
He however said negotiations for material funding lines were at advanced stages, adding the bank did not have a net foreign currency exposure.
On the bank’s capitalisation, Mbire said the ZWL$58.2 million net equity position was greater than the minimum capital threshold.
“The bank is actively pursuing strategies to ensure compliance with the USD5 million new minimum capital requirement effective December 31, 2020,” he explained.
“Given the need to retain and grow capital in the prevailing environment, the directors resolved not to recommend any dividend declaration for the period under review.”