AFC Commercial Bank, formerly Agribank, reduced its non-performing loan (NPL) ratio to 0.85 percent from 1.38 percent thanks to the increase in the loan portfolio and efficient debt collection.
The bank’s bad debt ratio fell below 1%, but remains slightly above the December 2020 industry average of 0.3%, according to the RBZ’s February 2021 monetary policy statement.
Gross loans and advances stood at $ 4,135 billion as of May 31, 2021, approximately 100% more than in December 2020. With only 0.85% of the loan portfolio, AFC has been extremely successful in curb the growth of non-performing loans.
The bank revealed in 2019 that it was winning the war on bad debts, thanks to better credit scoring to counter a once-malignant cancer that threatened to destabilize the financial system, following the banking sector crisis of 2003- 2004.
Thanks to sustained debt collection initiatives and more cautious closing initiatives, the bank saw its NPL ratio drop from 9% in 2018 to 8% the following year.
Bad debts had fallen to 1.38% in December 2020, from 3.70% 12 months earlier. And now, the rebranding of the state-owned financial services entity has seen the NPL ratio drop below 1%.
“The non-performing loan ratio (NPL) was 0.85% as of May 31, 2021 due to the growth of the loan portfolio and effective debt collection initiatives.
The sector’s average NPL ratio as of December 31, 2020 was 0.3%, in line with the RBZ monetary policy statement of February 2021, ”Acting Managing Director Elfas Chimbera said in the bank’s financial statements.
The bank’s total loan / deposit ratio was 67.4% as of May 31, 2021 against a budget of 49.1% and compared to the sector average in December 2020 of 39.5% according to the RBZ MPS of February 2021.
The bank said the agricultural ledger made up around 55% of the book’s total, at the end of May 2021.
The bank’s loan portfolio grew 632% from $ 268.4 million to $ 2 billion as it continues to pursue prudent asset growth, with asset quality a key priority, which was duly reflected in the decline in NPLs.
Total customer deposits stood at $ 6,135 billion, up 29% from April 30, 2021. The Bank ended the period with a liquidity ratio of 64%, well above the requirement. minimum liquidity of 30% of the RBZ.
The reconfigured bank reported tax-free profit up 1,086% to $ 569 million (historical terms) for the full year through December 2020, thanks to improved e-banking revenues and the growth of the loan portfolio.
The exceptional performance saw the bank declare a dividend of $ 191.6 million for the fiscal year ended December 31, 2020.
This dividend underlines that the bank is one of the few top performing parastatals that continue to provide shareholder returns.
Net interest income increased 790% to $ 281.8 million from $ 31.7 million in terms of historical costs. The loan portfolio increased during the period under review, reflecting the expansion of support to the agricultural sector.
In the meantime, following the launch of AFC Holdings, Agribank will be transformed into AFC Commercial Bank. The other subsidiaries are AFC Land and Development Bank of Zimbabwe, AFC Leasing Company and AFC Insurance Company.