MARKET WATCHERS are bullish on the future prospects of Barclays Bank Zimbabwe and estimate that its net income will climb 50 percent to US$5,8 million in the 2016 financial year on the back of expansion of its lending portfolio.
In 2015, Barclays’ net income crashed 41 percent to US$3,9 million from a year earlier, the bank reported on March 2.
Analysts say the recent decision by London-based Barclays Plc — which directly owns the Zimbabwe subsidiary – to sell the local unit within three years is unlikely to have an impact on the bank’s profitability.
In recent years, the bank has been conservative in its lending.
Last year, only 0,9 percent of its loans were non-performing compared to an industry average of 10,9 percent. But the loan book grew 19,4 percent to US$145,4 million last year when it began lending to the public sector.
Public sector loans accounted for US$10,2 million, or seven percent of Barclays Bank Zimbabwe Ltd’s total lending in 2015.
“As Barclays Bank Zimbabwe Ltd has recently changed its approach to lending, by being less conservative and venturing into the public sector, we, therefore, expect RoAEs (return on average equity) to continue increasing,” said a research note by stockbrokers IH Securities.
The RoAE measures a company’s profitability inside a year.
Barclays expects net earnings in the current year to double to US$10 million on stronger lending, reduced costs and product expansion. IH Securities forecast total loans to rise 6,5 percent in 2016. Total deposits will go up six percent, but slower than the 13,4 percent increase in 2015.
Lending to agriculture and mining will decline on account of the current drought and a slump in global commodity prices, IH Securities said. For the year, total income has been guided to climb seven percent to US$47,9 million from US$46,2 million in 2015.
“We expect the bank’s non-performing loans to remain lower than the sector average as the bank has been managing a clean book,” said IH Securities.
By comparison, Barclays’ peer CBZ Holdings reported recently that its loan book declined nine percent in 2015 on poor performance in agriculture and mining, with the ratio of bad loans at 6,9 percent. NedBank Group-owned MBCA Bank Ltd said on March 3 that lending rose 11 percent last year, but NPLs remained high.
Insulated from Barclays
Analysts contend that Barclays’ performance in the interim will not be affected by parent company’s exit plan.
“We do not expect the recent announcement by Barclays Bank Plc to have a material impact for Barclays Zimbabwe in the short term. However, we remain cautious as we await more news from the parent company,” warned IH Securities.
British financial group Barclays Plc said early this month would sell its multi-billion dollar assets in Africa to focus on European and American operations – a deal that may be concluded in the next three years.
This will see Barclays Plc end its 104-year presence in Zimbabwe. The bank is the second-oldest in the country after Standard Chartered Bank. Shares of Barclays Bank Zimbabwe Ltd fell more than three percent on the Zimbabwe Stock Exchange after the parent company announced its exit plans on March 1.
By close of trade on Wednesday, the share changed hands at USc3, its lowest in 52 weeks from a year-on-year high of USc4,4.
Year-to-date, Barclays Bank Zimbabwe Ltd has crashed 29,4 percent. But while profits are seen rising, analysts predict the stock will fall to as low as USc1,5 in the next 12 months.
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