AFC Commercial Bank, formerly Agribank, has reduced its non-performing loan (NPL) ratio to 0,85 percent from 1,38 percent through growing the loan book and effective debt recovery.
The bank’s bad loans ratio has fallen below 1 percent, but remains slightly above December 2020 industry average of 0,3 percent, as per RBZ Monetary Policy Statement of February 2021.
Gross loans and advances were $4,135 billion as at May 31, 2021, about 100 percent above the December 2020 position. At just 0,85 percent of the loan book, AFC has done extremely well to stem out NPLs growth.
The bank revealed in 2019 it was winning the war against bad loans, through better credit assessment to stymie a once malignant cancer that threatened to destablise the financial system, following the banking sector crisis of 2003-2004.
Through sustained debt recovery initiatives and more prudent ending initiatives, the bank saw its NPLs ratio fall from 9 percent in 2018 to close the following year at 8 percent.
The bad loans were down to 1,38 percent by December 2020 from 3,70 percent 12 months earlier. And now, the re-branding State owned financial services entity has seen the NPLs ratio fall below 1 percent.
“The non performing loan (NPL) ratio was 0,85 percent as at May 31, 2021 due to growth in the loan book and effective debt recovery initiatives.
The industry average NPL ratio as at 31 December 2020 was 0,3 percent as per RBZ Monetary Policy Statement of February 2021,” said acting chief executive Elfas Chimbera in the bank’s financial statements.
The bank’s total loan to deposit ratio was 67,4 percent as at May 31, 2021 against a budget of 49,1 percent and compared to December 2020 industry average of 39,5 percent as per RBZ MPS of February 2021.
The bank said the agriculture book represented about 55 percent of the total book, as at the end of May 2021.
The bank’s lending portfolio increased by 632 percent from $268,4 million to $2 billion as it continues to pursue cautious asset growth with asset quality being a key priority, which has duly reflected in falling NPLs.
Total customer deposits were $6,135 billion increasing by 29 percent from April 30, 2021. The Bank closed the period with a liquidity ratio of 64 percent, which was well above the RBZ minimum liquidity requirement of 30 percent.
The reconfigured bank reported untaxed profit vaulted 1 086 percent to $569 million (historical terms) in the full year to December 2020, on improved revenue from electronic banking and growth in the loan book.
The stellar performance saw the bank declare a $191,6 million dividend for the financial year ended December 31, 2020.
This dividend underlines the bank being one of the few best performing parastatals that continue to give a return on the shareholder.
Net interest income grew by 790 percent to $281,8 million from $31,7 million in historical cost terms. The lending portfolio increased during the period under review reflecting expansion in support of the agriculture sector.
Meanwhile, following the launch of the AFC Holdings, Agribank will be transformed into the AFC Commercial Bank. Other subsidiaries are AFC Land and Development Bank of Zimbabwe, AFC Leasing Company, and AFC Insurance Company.