Government directs Agribank to cut costs
By Shame Makoshori, Senior Business Reporter
The bank extended its profit position, posting a $1,8 million profit during the five months ended May 31, 2017.
THE Minister of Finance and Economic Development, Patrick Chinamasa, has directed state-owned farm financier Agribank to immediately cut costs from 36 percent to 30 percent of income, in line with its strategy to sustain profitability.
The bank turned a $4,8 million net profit in the year ended December 31, 2016, after incurring a $6,3 million loss during the previous year.
Chinamasa, who spoke at Agribank’s annual general meeting in Harare last week, said focus should also be on containing non performing loans (NPLs), keeping these within the Reserve Bank of Zimbabwe (RBZ) single digit target.
The bank extended its profit position, posting a $1,8 million profit during the five months ended May 31, 2017, chief executive officer Sam Malaba told the AGM in a performance update for the year to date. This was three times over budget.
Chinamasa said there was marked progress towards returning the bank to stability in the past year, which he attributed to the bank’s cost cutting initiatives, including staff rationalisation.
As part of the strategy to help the bank sustain its recovery, government ploughed back a $914 000 dividend declared by the Agribank board.
Cost containment measures resulted in the bank recording a 14,5 percent decline in operating costs to $22,3 million during the year ended December 31, 2016, from $26 million the previous year, according to Malaba.
Cost reviews are expected to help the lender to free resources to fund farming activities and boost government initiatives such as the command agriculture programme.
Chinamasa emphasised that Agribank should stick to its mandate of funding the farming sector and not to spread resources to other sectors of the economy at the expense of farmers.
“We are happy to notice the reduction in NPLs,” Chinamasa told the AGM.
“The non performing loans are at 14 percent. We want them to be reduced further to five percent, which is the RBZ guideline. That is good.”
He said expenses should come down to 30 percent, from 36 percent which he said was “not bad but we want (the bank) to do more”.
“I am pleased that I am beginning to see the turnaround of the bank. Next year we want to see improvements in cost cutting,” said Chinamasa.
The Minister of Finance represented government, the sole shareholder in Agribank.
“They (Agribank) should maintain and remain cautious that they must contain their expenditure so that the ratio of expenditure to revenue is around 30 percent,” Chinamasa told reporters after the AGM.
“The bank is facing challenges; some of them which are a result of successes that we have achieved; some of them being increased use of plastic money… The ICT (information communication technology) structure is not coping. As we are going into the future, this is an area they have to attend to seriously,” he said.