Old Mutual Zimbabwe profit up 20 percent

Leading  international financial services provider Old Mutual plc says its Zimbabwe unit recorded a 20 percent jump in profit to R848 million ($64 million) last year, from  R708 million  ($53. 4 million) in 2015, mainly due to the depreciation of the rand against the US dollar.

Old Mutual Zimbabwe, which is due to report its 2016 financials next Wednesday, is part of the global group’s Old Mutual Emerging Markets (OMEM) business unit which provides long-term savings, protection, investment and lending to retail and corporate customers in 15 African countries.

In its  preliminary results for the year ended 31 December 2016, released on Wednesday,  Old Mutual plc said Net Client Cash Flows (NCCF) of R1.2 billion ($90.5 million) was R300 million ($22.6 million ) lower than the prior year following higher outflows as a result of the current economic crisis and uncertainty surrounding the introduction of bond notes.

The group said its wholly owned Zimbabwean banking unit CABS reported a nine percent decline in its gross loan book to R8.3 billion, ($626 million) but a three percent  increase in constant currency.

“This reflects lower personal loans due to a more cautious lending strategy given the Zimbabwean economic outlook, which was offset by an increase in secured mortgage lending. Deposits increased by 1 percent  in constant currency from 2015 driven by an increase in transactional accounts,” said Old Mutual.

Despite the operating headwinds in some of its units, Zimbabwe included, Old Mutual plc said OMEM recorded pre-tax Adjusted Operating Profit (AOP) growth of of three percent during the year, which reflects a 15 percent improvement during the second half of the year.

It added that International Financial Reporting Standards  profit of R10.7 billion (US$807,6 million) was three percent down on the prior year, largely due to an impairment on the Old Mutual Southern and Eastern Africa  

“The impairment was driven by the constrained macroeconomic environment in Zimbabwe placing strain on the future outlook for profit generation, synergies expected from the acquisition of (The UAP Group) in East Africa have not yet manifested in the financial results and the strain placed on the future profit prospects at Faulu as a result of the introduction of interest caps on lending in Kenya.”

The group also announced that it launched a drought insurance protection product for smallholder maize farmers in Zimbabwe in partnership with Blue Marble Microinsurance, a group of international insurance and reinsurance companies collaborating to extend protection to underserved markets.

Old Mutual noted that although the US Dollar remained Zimbabwe’s official currency, when bond notes were introduced in November 2016, the equity market responded with a 30 percent rally as investors moved capital to ‘safer’ value investment.

The group also announced South Africa’s former Finance Minister Trevor Manuel as chairman of Old  Mutual Emerging Markets.

Prior to his appointment, Manuel was a non-executive director of Old Mutual since January 2016.- The Source

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