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Enquiries: NMBZ HOLDINGS LIMITED Benefit P Washaya, Chief Executive Officer, NMBZ Holdings Limited [email protected] Benson Ndachena, Chief Finance Officer, NMBZ Holdings Limited [email protected] Website: http://www.nmbz.co.zw Email: [email protected] Telephone: (+263-4) 759 651/9 Cash Guaranteed Collect USD Cash at NMB Bank when you receive money via 31 December 31 December FINANCIAL SUMMARY 2018 2017 CONDENSED AUDITED US$ US$ Total income (US$) 74740671 53606281 CONSOLIDATED Operating profit before impairment charge (US$) 31 155 227 16 870 839 Totalcomprehensiveincome(US$) 21267632 10029136 RESULTS Basic earnings per share (US cents) 5.43 2.58 Dividend per share (US cents) 0.96 0.36 Total deposits (US$) 434957949 348956385 FOR THE YEAR ENDED Totalgrossloansandadvances(US$) 262335026 211005418 Total shareholders’ funds and shareholders’ 31 DECEMBER 2018 liabilities (US$) 79962313 65651843 CHAIRMAN’SCHAIRMAN’S STATEMENTSTATEMENT Capital (continued) TheThe Group’sGroup’s shareholders’shareholders’ fundsfunds andand shareholders’ liabilities have increased by 22% from US$65 651 843 as at 31 INTRODUCTIONINTRODUCTION December 2017 to US$79 962 313 as at 31 December 2018 as a result of the current year’s total comprehensive income. TheThe GroupGroup hashas continuedcontinued inin thethe pursuitpursuit ofof itsits shortshort andand mediummedium termerm goalsgoals andand thethe accompanyingaccompanying resultsresults areare testimonytestimony toto thethe considerableconsiderable progressprogress towardstowards ourour statedstated strategy.strategy. Thehe financialfinancial r resultsesults c continueontinue t too b bee l largelyargely d drivenriven b byy t thehe The Bank’s regulatory capital as at 31 December 2018 was US$74 927 487 and is above the minimum required Bank’sBank’s continuedcontinued diversificationdiversification i intonto t thehe b broaderroader m amarketrket se segmegments,nts, enhancedenhanced useuse ofof thethe bank’sbank’s digitaldigital offerings,offerings, stricterstricter regulatory capital of US$25 million. Furthermore, the bank is on course to meet the required US$100 million creditcredit underwritingunderwriting standardsstandards andand containmentcontainment ofof non-perfonon-performingrming loans.loans. TheThe bankbank witnessedwitnessed a slowdownslowdown inin businessbusiness capitalisation by 2020. activityactivity duringduring thethe lastlast quarterquarter ofof 20182018 asas businessesbusinesses adjusadjustedted toto thethe newnew policypolicy measuresmeasures outlinedoutlined inin thethe TransitionalTransitional StabilisationStabilisation ProgrammeProgramme presentedpresented inin AugustAugust 20182018 soonsoon afterafter thethe nationalational elections.elections. NotwithstandingNotwithstanding thethe slowdown,slowdown, thethe group’sgroup’s financialfinancial p performanceerformance w wasas w wellell a abovebove p priorrior y year.ear. FUNCTIONAL CURRENCY AND AUDIT OPINION Between 2014 and 2016, the Zimbabwean economy experienced a massive liquidity crisis which eventually prompted TheThe keykey financialfinancial h highlightsighlights o off t thehe G Grouproup a ass a att 3 311 D Decemberecember 2 2018018 areare depicteddepicted below:below: the Monetary Authorities to introduce the bond notes in November 2016 whilst encouraging the public to continue using the other currencies in the multi-currency basket. The bond notes were introduced at an official fixed exchange rate of 1:1 with the USD and the Monetary Authorities specifically directed financial institutions not to open separate vault and cash accounts for the USD and the bond notes. Total assets (US$000’s) Shareholders’ funds and 600,000 Shareholders’ liabilities In October 2018, the Monetary Authorities instructed financial institutions to separate bond notes and USD accounts 527,068 (US$000’s) and indicated that corporates and individuals could proceed to open Nostro Foreign Currency Accounts (FCA), for 500,000 foreign currency holdings, which were now being exclusively distinguished from the existing RTGS based accounts. 422,564 90,000 79,962 400,000 80,000 However, it should be noted that at the time of this policy pronouncement, the Monetary Authorities did not state that 70,000 65,652 they had introduced a new currency for Zimbabwe, which actually meant that the USD remained as the currency of 300,000 60,000 reference. By 31 December 2018, there had been no pronouncement by the Monetary Authorities to the effect that 50,000 there had been a new currency introduced, which could be considered as the country’s functional currency. On 22 200,000 40,000 30,000 February 2019, the Reserve Bank of Zimbabwe (RBZ) issued an Exchange Control Directive, RU 28 of 2019 which 100,000 20,000 established an interbank foreign exchange market to formalise the buying and selling of foreign currency through the 10,000 Banks and Bureaux de change. In order to establish an exchange rate between the current monetary balances and 25% 22% foreign currency, the Monetary Authorities denominated the existing RTGS balances in circulation as RTGS Dollars. 2017 2018 2017 2018 Initial trades on 22 February 2019 were at USD1: RTGS$2.5. On the same date, Statutory Instrument 33 (SI 33) of 2019 was also issued and it specified that for accounting and other purposes, all assets and liabilities that were in USD immediately before the 22nd of February 2019 were deemed to have been valued in RTGS Dollars at a rate of Total comprehensive Basic earnings per share US$1: RTGS$1. income (US$000’s) (EPS) (US cents) 25,000 6.00 5.43 The fixed exchange rate of US$1: RTGS$1 for the period prior to the effective date of 22 February 2019 is not in 21,268 compliance with IAS 21. In terms of IAS 21, foreign currency monetary items shall be translated using the closing rate, 5.00 20,000 non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the 4.00 exchange rate at the date of the transaction; and non-monetary items that are measured at fair value in a foreign 15,000 currency shall be translated using the exchange rates at the date when the fair value was measured. Foreign currency 10,029 3.00 2.58 transactions shall be recorded, on initial recognition in the functional currency, by applying to the foreign currency 10,000 2.00 amount the spot exchange rate between the functional currency and the foreign currency at the date of the 5,000 transaction. The Group used a fixed exchange rate of US$1: RTGS$1 for the year ended 31 December 2018 and thus 1.00 did not comply with the requirements of International Accounting Standard 21 (IAS 21) “The Effects of Changes in 110% 112% Foreign Exchange Rates”, as doing so would have been in contravention of SI 33 of 2019. However, the Directors 2017 2018 2017 2018 performed a sensitivity analysis on note 23.1 to illustrate the impact on the Group’s statement of financial position as at 31 December 2018 had the financial statements been restated using the first available interbank mid-rate on 22 GROUPGROUP RESULTSRESULTS February 2019 of USD1:RTGS$2.5. A further analysis of the impact on the statement of financial position has also been performed using the rates of USD1:RTGS$3 and USD1:RTGS$4. FinancialFinancial performanceperformance In light of the failure to fully comply with the requirements of IAS 21, the Group’s independent auditors, Ernst & Young, TheThe profitprofit b beforeefore t taxationaxation w wasas U US$27S$27 1 14343 2 27575 ( (20172017 – –U US$13S$13 0 01717 6 69090) duringduring thethe periodperiod underunder reviewreview andand thisthis gavegave have issued an adverse opinion on the financial statements for the year ended 31 December 2018. riserise toto totaltotal comprehensivecomprehensive incomeincome ofof US$21US$21 267267 632632 (2017(2017 – US$10US$10 02929 136).136). TheThe GroupGroup achievedachieved a basicbasic earningsearnings perper shareshare ofof 5.435.43 centscents (2017(2017 - 2.582.58 cents).cents). DIVIDEND OperatingOperating expensesexpenses amountedamounted toto US$34US$34 720720 428428 andand thesethese werewere upup 26%6% fromfrom a priorprior yearyear amountamount ofof US$27US$27 578578 347.347. In view of the significantly improved financial performance recorded by the Group in the year under review and the TheThe increaseincrease inin operatingoperating expensesexpenses waswas duedue toto increasedincreased trantransactionsaction processingprocessing andand operationaloperational costscosts arisingarising fromfrom sound capital ratio, the Board proposes to declare a final scrip dividend alternative to the cash dividend of 0.96 RTGS thethe Bank’sBank’s digitaldigital drive,drive, continuedcontinued expansionexpansion intointo thethe broadbroaderer marketmarket segmentssegments andand generalgeneral inflationaryinflationary p pressuresressures cents per share. The scrip dividend option was arrived at after taking into account shareholders’ expectations, value largelylargely drivendriven byby foreignforeign currencycurrency shortages.shortages. preservation and the need to ensure sustainable organic growth in view of the banking subsidiary’s regulatory capitalisation requirements. ImpairmentImpairment losseslosses onon financialfinancial a assetsssets m emeasuredasured at atam oamortisedrtised cos costt amountedamounted toto US$4US$4 011011 952952 forfor thethe currentcurrent periodperiod fromfrom a priorprior yearyear amountamount ofof US$3US$3 853853 149149 andand thethe increaseincrease waswas mainlmainly duedue toto thethe adoptionadoption