Review of the period

Against the background of a relatively modest 3% growth in total group assets over the period, we have taken steps to deploy a greater proportion of group funds in higher yielding assets. In Zimbabwe, for example, we have placed US$150million in treasury bills for investment purposes and have grown our advances portfolio by US$30million. Even so, group banks continue to maintain highly liquid balance sheets with over 50% of group assets in liquid or near liquid form. In general, business sentiment remains cautious across our territories of operation and this has limited the quantum of lending opportunities that meet our underwriting criteria. Growth in customer liabilities has been contained accordingly with the focus on increasing the proportion of lower cost transactional balances.

The increase in Zimbabwe interest earning assets has translated into a significant increase in net interest income and, despite a lower interest rate regime in all territories, interest margins have been maintained across the group. Overall, non-interest income is in line with plan as income from foreign exchange transactions exceeded forecast and compensated for a lower than expected level of fee and commission income. Operating expenditure has been contained with a downward trend in the cost to income ratio which, at 64%, remains nevertheless some way off our medium term target of 50%. On an annualized basis, profit attributable to shareholders for the six months of US$10.8million is approximately 15% ahead of the 2018 profit forecast contained in our July 2017 pre listing statement.

Outlook

The capital adequacy and liquidity ratios of all group banks comfortably exceed the prescribed prudential minimum ratios in their respective territories. As a result, significant capacity exists to grow our assets and increase the proportion of higher yielding risk assets in our asset base. We will, however, continue to exercise prudence in our balance sheet management and do not foresee a major increase in our risk appetite given the current economic and business environment prevailing in territories where we operate.

Two major projects are underway, both of which are progressing satisfactorily, namely, the implementation of an enhanced technology platform in Zimbabwe and the establishment of a group shared services centre in Mauritius. While these initiatives may initially lead to some upward pressure on costs, the eventual outcome should be major efficiency gains, an enhanced customer experience and a more robust risk and compliance infrastructure for the group as a whole.

From its current strong base, the group is confident of its ability to achieve sustained growth and deliver increased future value to all its stakeholders.

Dheeraj Dikshit
Director

John M. O’Neill
Director