• Declining profitability: Innbucks Microbank's profit after tax has decreased, despite an increase in total income
  • Increasing expenses: The bank's operating expenses rose significantly, putting pressure on its profit margins
  • Core capital below requirements: Innbucks Microbank's core capital position fell below the minimum regulatory requirements, potentially necessitating corrective actions to strengthen its capital position

Harare- Innbucks Microbank, a microfinance bank formed through the merger of Innbucks and Ndoro Microfinance, has experienced a decline in profitability, with its profit after tax decreasing from ZWL26.99 billion to ZWL24.60 billion, despite an increase in total income from ZWL37 billion to ZWL45.8 billion.

The bank's operating expenses doubled to ZWL13.7 billion, resulting in a narrower profit before tax of ZWL27 billion. Net interest income rose to ZWL1 billion, while fee and commission income increased to ZWL14 billion.

As a result of profit decline, the bank's core capital position closed at ZWL14.84 billion, which falls below the minimum regulatory requirement of ZWL equivalent of US$5 million.

This is primarily due to the write-down of ZWL16.93 billion on the Savings Bond held with the Central Bank. The bank's management has implemented a plan to address this non-compliance.

In terms of investments, the Microbank holds investment securities valued at US$5 million with the Reserve Bank of Zimbabwe, and no impairment has been recognized on these instruments. The bank utilizes these instruments as collateral for funding lines, generating significant net interest income.

The operating environment is expected to remain challenging in the short to medium term, and InnBucks' strategy will focus on investing in technology to deliver financial services.

The bank's total income for the sixteen-month period ended June 2023 amounted to ZWL45.80 billion, mainly driven by net interest income and fee and commission income. Total assets stood at ZWL92.51 billion, with cash and interest-generating financial assets constituting 58% of the assets.

Innbucks Microbank has formed partnerships with key stakeholders to meet the needs of its diverse clientele. It offers various products, including loans, payroll processing, structured finance, international banking, and wallet services.

Given liquidity challenges and increased minimum lending rates, many businesses are shifting their operations from the local currency to foreign-denominated currencies. InnBucks has positioned itself to ensure business continuity in this changing landscape. 

The bank plans to introduce new products such as electricity sales, nano loans, and customer loyalty programs in the second half of the 2024 financial year.

Equity Axis News