WARNING: This is Version 1 of my old archive, so Photos will NOT work and many links will NOT work. But you can find articles by searching on the Titles. There is a lot of information in this archive. Use the SEARCH BAR at the top right. Prior to December 2012; I was a pro-Christian type of Conservative. I was unaware of the mass of Jewish lies in history, especially the lies regarding WW2 and Hitler. So in here you will find pro-Jewish and pro-Israel material. I was definitely WRONG about the Boeremag and Janusz Walus. They were for real.
Original Post Date: 2011-04-22 Time: 14:00:24 Posted By: News Poster
By Brett Chulu
Banks Have Been Publishing Their Audited Results for 2010. As strategic HR, corporate governance and leadership are the chief interests tackled by this column, we found it fitting to analyse the 2010 banking performance from these three business angles. In conducting this analysis, we went beyond the traditional ratio analyses. We attempted to establish patterns between staff costs, aspects of corporate governance and the bank’s profitability using advanced statistical analysis. We will present our findings in non-technical terms. (table above)
Banking Business Model in Zimbabwe
To cater for our readers who are not financial experts we have decided to give a background explanation of what the business of banking is all about. A business model is how a business makes money. In general, a business makes money when it gets more income than it pays out. A bank, as a business is expected to make money via the same principle. On the income side, a bank is expected to earn interest on the monies it lends. On the cost side, a bank pays out interest on the deposits it holds. Thus a bank makes money by earning more interest than it pays out. Simply put, banks are in the business of lending money. Banks, though they charge commissions and fees, this should not be their primary source of income.
TN Bank stands out
An analysis of the 2010 banking financial results shows that TN Bank is the only bank that derived the bulk of its income from lending. Income from lending for TN Bank is twice as much as income from non-lending activities.
Even CBZ, the largest bank by deposits and income in 2010 gets the bulk of its income from non-lending activities, and so are the rest of the banks in the table above. This seems to suggest that the so-called blue chip banks, could suffer seriously if say the government decides to drastically reduce banking charges levied on account holders. South African banks are facing the possibility of serious cuts in banking charges, should the government of South Africa proceed with its plans to come hard on bank charges. If the government of Zimbabwe mulls traversing a similar path, then many Zimbabwean banks could overnight face imminent collapse. This is not an alarmist’s siren.
Banks profitability not sustainable
Of the banks in the table above, only Premier Bank and Barclays posted losses. An analysis of the profitability of the other banks reveals that arguably TN and Kingdom’s profitability is sustainable. This is due to two reasons. First, these two banks were able to meet their staff costs entirely from lending income, leaving a sizeable portion to cover other operational costs. Second, should banks yield to foreseeable pressure to increase salaries, TN and Kingdom could possibly oblige and still be marginally profitable. For the rest of the banks that would be a big ask. The analysis that follows gives the statistics to support this argument.
Staff costs to lending income
Traditionally, for banks, staff costs are compared with total income. We deliberately decided to compare staff costs with lending income, the traditional core business of commercial and mortgage banks. This measure brings out what the traditional staff costs to income ratio hides- – the ability of a bank’s core business to fund its human capital investment. For us, in this current economic environment this is a better measure of the stability of bank profits.
The data paints a very sad picture, highlighting the vulnerability of banks to a sudden cut on fees and commission income. In 2010 there were four groups in relation to a bank’s ability to fund staff costs from the core business of lending.
lFirst, there is a group of banks that were not able to generate net income from lending activities. Premier Bank falls in this category.
lSecond, there is a group of banks that generated insufficient positive net lending incomes to cover staff costs. Barclays Bank’s staff costs exceeded the income from lending 4,25 times. It should be noted that this analysis excludes the US$6,5m Barclays received from its parent to fund retrenchment. Standard Chartered Bank’s profitability is clearly driven by non-lending income in the form of fees and commissions. This is evident from the fact that Standard Bank’s staff costs are 1,87 times net lending income.
lThird, there is a group comprising banks that were able to wholly fund their staff costs from their core business, but are left with very little surplus from net lending income to fund other operating costs. For instance, Stanbic, after using 67 cents for every dollar from net lending income was left with 33 cents to contribute towards non-staff costs. Similarly, for CBZ, only 22 cents per dollar of net lending income remained to cover other operational costs.
lFourth, there is a group of banks represented by FBC that generated just enough money from lending activities to cover staff costs.
TN Bank seems to have the most sustainable financial performance in that for every dollar of income from net lending, 32 cents could cover staff costs. That left 68 cents to cover non-staff costs. This explains why in this sample, TN has the least staff cost to total income ratio. For every dollar of total income, TN spent 22 cents on staff costs.
In brief, almost all profitable banks in Zimbabwe are generating profits from non-lending activities. That should be a cause for concern as this reflects that current banking profits are not coming from the banks’ core lending business.
Staff costs and board meetings
We uncovered a very interesting relationship between staff costs and the number of times the main board met in 2010.
The more frequent the board met the higher was the staff costs to income ratio. This relationship was extremely strong. It would appear that staff costs were a major item of concern to banking organisations.
Board meetings and profitability
Our statistical analysis shows a very strong relationship between the number of board meetings convened during the year and the profitability of a bank.
The more the board meetings were convened during the year the less the profitability of the bank. This finding suggests that those banks that were struggling convened their boards more often than their better performing peers. It could suggest that when boards meet too frequently, the focus could be crisis management. This seems to suggest that the quality and substance of the board discussions matter more than the frequency of the board meetings.
Board attendance and profitability
Yet another interesting finding emerged. High rates of board attendance did not show a relationship with profitability. This reflects that board attendance is a hygienic factor. Presence must be matched with essence for board attendance to have a positive impact on the profitability of banks.
Original Source: 
Original date published: 20 April 2011
Source: http://allafrica.com/stories/201104220595.html?viewall=1