The CBZ Holdings group announced the results today, the 3rd of August and with the current economic climate, the chairman, Mr Matimba can understandably take pride in them. The group performed well despite the negligible increase in profit after taxation which when you consider the adverse environment is quite impressive.
The chairman noted that the IMF and World Bank both revised upwards the country’s projected growth rate for 2017 but we can agree with him that the operating environment remained challenging. Average lending rates fell and deposits plummeted even further. The broad money supply increased though but was not enough respite.
The results make for interesting reading though. On the one hand, total income and earnings per share both increased but the taxation charge was low because of high deferred tax income. If the current tax charge had been deducted, the profit after tax would have been much lower, obviously.
The highlights of the report however are the interest income compared to the non-interest income. Interest income naturally comes from interest charged on loans, overdrafts etc and this figure decreased significantly. This is not surprising as we already alluded to the falling lending rates and deposits. What is surprising is that the decrease in interest from loans and mortgages only was over $8m.
If the interest income decreased, which novices like ourselves thought was the main income generator for banks, then how come the operating income increased? BANK CHARGES. That is how. The commission and fee income increased by almost $8m. Notice how that offsets the decrease in interest income. That’s how the profit after tax did not decline.
With some allegations that banks might be colluding with regards to bank charges it is easy to understand why they might want to do that. Commission and fee income has become too important for banks to leave it to market forces. Should this be regulated more? The question then becomes, will the banks survive if so? Interesting times, aren’t they.