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Audited Financial Results for the Year Ended 31 December 2020

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Audited Financial Results for the Year Ended 31 December 2020 Investments Savings Loans Mortgages Insurance Financial Advisory Community Involvement Audited Financial Results for the year ended 31 December 2020 INFLATION ADJUSTED FINANCIAL HIGHLIGHTS ACTING GROUP CHIEF EXECUTIVE’S REPORT Introduction: The Group’s primary financial statements are adjusted for inflation in terms of International Accounting Total assets Total capital and reserves Net profit after taxation Standards (IAS 29) – Financial Reporting in Hyperinflationary Economies. Historical cost financial statements have been issued for information purposes only. 31 Dec 2020 ZW$1,065bn Performance Outturn: 21% 22% In 2020, the Group recorded a 9% decline in total income from ZW$3.656bn in 2019 to ZW$3.323bn. The revenue performance was mainly underpinned by an 87% decrease in fair value adjustments, from ZW$1.032bn 31 Dec 2019 in 2019 to ZW$0.136bn in 2020. Banking commissions and fees also fell in real terms by 8%, from ZW$1.242bn ZW$1,939bn in 2019 to ZW$1.142bn in 2020, as inflation continued to outpace rate adjustments for commissions and fees. 31 Dec 2020 31 Dec 2020 Net interest income increased by 0.34%, from ZW$0.657bn in 2019 to ZW$0.660bn in 2020. ZW$18,977bn ZW$8,038bn Loan impairment charges to the income statement decreased from ZW$0.339bn in 2019 to ZW$0.282bn in 2020. Overall credit quality continued to improve, with non-performing loans as a percentage of total loans 31 Dec 2019 31 Dec 2019 reducing from 2% in 2019 to 0.7% in 2020. ZW$15,636bn ZW$6,575bn 45% Net insurance related earnings declined from ZW$0.4bn in 2019 to a loss of ZW$0.002bn in 2020. This was influenced by a 58% increase in insurance related expenses which grew faster than the growth in gross premiums. Gross premiums increased by 2% from ZW$1.128bn in 2019 to ZW$1.148bn in 2020, whilst the Return on equity Liquidity ratio (Group) Cost to income ratio related expenses increased from ZW$0.728bn in 2019 to ZW$1.149bn in 2020. Other income increased by 152%, from ZW$0.663bn in 2019 to ZW$1.669bn in 2020, mainly underpinned by 31 Dec 2020 31 Dec 2020 31 Dec 2020 exchange gains. The subdued revenue performance in 2020 was mainly due to the combined effects of low-cost absorption 15% 79% 84% as performance of most economic sectors receded. This was compounded by the freeze on banking fees by the authorities which was necessary to ameliorate the effects of COVID-19 on industry and the general public. 31 Dec 2019 31 Dec 2019 31 Dec 2019 Operating costs increased by 25% from ZW$2.222bn in 2019 to ZW$2.789bn in 2020, largely influenced by a 58% 88% 61% catch-up adjustment on the cost base in tandem with the inflation profile over the past 2 years. The cost to income ratio rose from 61% in 2019 to 84% in 2020. The sustainability of the cost base against contracting income levels in real terms continues to be a matter of continued strategic importance for the 43pps9pps 23pps Group. Profit from ordinary activities declined by 63% from ZW$1.433bn in 2019 to ZW$0.534bn in 2020. An increased transfer to the life fund of ZW$0.599bn, compared to ZW$0.093bn in 2019 was made on the back pps - percentage points of strong performance of the underlying assets. The Group earned ZW$1.405bn as its share of profits reported by its associate companies for 2020, compared CHAIRMAN’S STATEMENT to ZW$1.091bn in 2019. The share of profits from associates is largely driven by the revaluation of investment properties which constitute the bulk of the assets at a significant listed investee entity. Operating environment: The Group posted a net profit after taxation of ZW$1.065bn in 2020, representing a 45% decline from the The operating environment remained beset with significant headwinds in the year 2020, with the outbreak ZW$1.939bn attained in 2019. of the COVID-19 pandemic taking centre stage, exacerbating an already fragile domestic economy. Like most Meanwhile, the Group’s total assets increased by 21% in real terms, from ZW$15.636bn as at 31 December other economies globally, Zimbabwe endured varying levels of lockdown restrictions during the year as part of 2019 to ZW$18.977bn as at 31 December 2020. measures instituted to limit the spread of the COVID-19 virus. This adversely affected business activities across the board. Deposits and other related funding account balances grew by 15%, from ZW$6.155bn as at 31 December 2019 to ZW$7.108bn as at 31 December 2020. The introduction of the foreign exchange auction system in June 2020 brought a modicum of stability in Earning assets increased by 25% from ZW$7.982bn as at 31 December 2019 to ZW$10bn as at 31 December the exchange rate, which curtailed the, hitherto, rapid expansion in the general price level. This saw annual 2020 whilst constituting 53% of total assets (51% as at 31 December 2019). inflation rate dropping from a peak of 837.53% in July 2020 to 348.59% in December 2020. According to the The Group maintained a comfortable liquidity margin of safety, with the ratio of liquid assets to customer Confederation of Zimbabwe Industries, industry capacity utilisation is reported to have improved at 47% as at deposits being above 79% throughout the year against a prescribed ratio of 30%. year end, compared to 36.4% in 2019. The Group’s total equity increased by 22%, from ZW$6.575bn as at 31 December 2019 to ZW$8.038bn as at 31 December 2020, driven by the positive performance for the year as well as gains on the revaluation of Group Performance: properties and equipment. I am pleased to announce that despite challenges in the macroeconomic environment, the ZB Financial Holdings Operations Review: Limited (ZBFH) Group remained profitable, greater detail is posted in the Acting Group Chief Executive’s report. Banking Operations: Capital Requirements: ZB Bank Limited posted a profit of ZW$0.633bn in 2020, as compared to ZW$0.819bn in 2019. The reduction in profitability was mainly as a result of an increase in operating expenses from ZW$1.632bn in 2019 to As at 31 December 2020, all ZBFH companies were in compliance with prescribed minimum capital requirements. ZW$2.284bn in 2020. The Bank’s total assets stood at ZW$12.434bn as at 31 December 2020, from ZW$10.244bn as at 31 December The Group is confident that it will meet the new minimum capital requirements for banking operations, which 2019. come into effect from 31 December 2021. This will be achieved by the re-arrangement of capital resources and the planned merger of banking operations within the Group. ZB Building Society posted a loss of ZW$0.055bn for the year ended 31 December 2020, reducing from a profit of ZW$0.285bn in 2019. Its assets increased from ZW$1.043bn as at 31 December 2019 to close the year 2020 at ZW$1.119bn. Dividends: The Board has declared a dividend of ZW74.13 cents per share for the year ended 31 December 2020. A detailed A review of the branch network was done in 2020 resulting in the merger of branches in Harare and Bulawayo into modernised facilities with improved ambience which also offer safe online self-help facilities. dividend announcement will be published after the Annual General Meeting. During the year, the Group expanded its product portfolio by launching VISA and Kesto Diaspora Banking. Legal Contingencies: Insurance Operations: The long-standing legal dispute between the Company and Transnational Holdings Limited (THL) regarding the ZB Reinsurance posted a profit of ZW$0.086bn in 2020 compared to ZW$0.113bn in 2019. Its total assets ownership of Intermarket Holdings Limited (IHL) was resolved by the withdrawal of THL’s appeal at the Supreme increased in real terms from ZW$0.678bn as at 31 December 2019 to close the year 2020 at ZW$0.839bn. Court of Zimbabwe on 2 October 2020. This followed a settlement arrangement in which the Government of The company has maintained good relations with its cedants and retrocession partners. Zimbabwe (GoZ) ceded its shareholding in the Company to THL in transactions concluded between 2017 and 2020. ZB Life Assurance posted a profit of ZW$0.135bn in 2020, compared to ZW$0.650bn in 2019. Its total assets increased in real terms from ZW$2.418bn as at 31 December 2019 to ZW$3.257bn as at 31 December 2020. Compliance & Regulatory Issues: Growth in life assurance premiums has slowed down significantly as household incomes are affected by The Group has dealt with all governance issues which were the subject of a Corrective Order issued by the inflation. Reserve Bank of Zimbabwe (RBZ) on 7 March 2017 and reviewed in March 2018 and awaits the lifting of the The company has started offering funeral service facilities as an add-on to its bouquet of services in partnership order upon satisfactory review by the regulator. with selected partners. Other Strategic Operations: Directorate: Land bank acquisition was maintained as a focal strategy to preserve value against inflation. Messrs Sydney Bvurere and Olatunde Akerele resigned from the Board on 3 May 2021 and Ronald Mutandagayi resigned as Group Chief Executive from the Board and the Company on 31 May 2021. The Group attained an operating licence for its micro-finance business on 3 December 2020, and the unit was launched virtually on 16 December 2020, initially operating from 2 branches in Harare.
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