CBZ’s diversification strategy pays off

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Tawanda Musarurwa
Zimbabwe’s largest financial institution, CBZ Holdings’ seems to be hitting all the right notes with its diversified financial services as first quarter numbers reflect have risen significantly.

Acting CEO Peter Zimunya, told shareholders recently that the group was “pursuing a strong diversification strategy to broaden and stabilise earnings.”

At the end of last year, CBZ Holdings expanded its portfolio by launching CBZ Properties, but it is the performance of its standing portfolios keep shareholders smiling.

Financial experts say diversification is a fundamental principle of prudent investing, and the group’s portfolios are performing well on indicators of growth, profitability and market evaluation.

According to the CEO the linchpin subsidiary, CBZ Bank, retains dominance with deposits as at the close of the first quarter accounting for 21, 9 percent stake of the market share.

Zimbabwe’s financial services sector currently has 19 players.

For Q1 2018, the bank’s total deposits increased by 1, 2 percent to $1, 83 billion compared to $1, 8 billion prior year same period.

Management attributed this growth to a 26 percent increase on savings deposits, which was in line with the group’s focus on mobilising retail deposits to manage cost of funds.

The value of transactions processed by its flagship CBZ Bank reached $7, 7 billion during the quarter under review compared to $6,2 billion same period last year.

And CBZ Bank’s number of accounts increased to 214 000 by the close of Q1 2018, from 205 000 in the prior comparable period.

The group’s wealth management subsidiary, Datvest, is the fourth largest of 16 asset management companies in Zimbabwe.

According to the group’s latest figures funds under management at Datvest account for 5, 8 percent of the local market share.

Funds under management increased to $237 million from $148 million despite subdued performance on the stock market during the quarter.

CBZ Insurance and CBZ Life both account for 7 percent of the market share, respectively. Gross Written Premium for CBZ Insurance and CBZ Life comprise 5,3 percent and 2,6 percent of their markets, respectively.

Insurance assets increased to $9,6 million from $8,3 million attributed to progression in underwritten business.

The CEO highlighted the group’s continuous product review and expansion of distribution channels as a contributing factor to the rise.

With respect to its insurance business, the group launched the CBZ Life Employee Benefits and the Hospital Cash Plan.

CBZ Risk Advisory ranks 11th out of 32 players with its Premium Written for the FY2017 accounting for 3,9 percent of the market share.

Even for the new kid-on-the-block – CBZ Properties — the signs are good as the group has infrastructure projects worth over $28 million on its books for 2018.

The benefits of the group’s diversification strategy showed again as Zimunya highlighted to shareholders that total assets increased by 2,5 percent to $2,18 billion compared to $2,13 billion in the quarter under review from the same period last year.

The liquidity position of CBZ Holdings is sound staying above the regulatory ratio of 30 percent, while the capital adequacy levels for its subsidiaries are above the regulated levels.

CBZ Holdings’ return on asset and return on equity ratios improved ascribed to 20 percent revenue growth and 5 percent cost reduction.

Total income for the first quarter was up 20,1 percent to $45,2 million compared to $37,7 million over same period last year, attributable to strong income generation.

CBZ Holdings’ diversification drive has been an effective allocation of financial and organisational resources and the impact on financial performance is there to see.

Market analysts IH Securities predict another profitable financial year for CBZ Holdings:

“We expect the group to maintain profit growth and have therefore forecast FY18 net income of $37,5 million up 34,6 percent from $27,8 million reported in FY17. We expect an ROE (return on equity) of 11,5 percent for FY18, up from 9,4 percent in FY17.”

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