Old Mutual has made a strategic decision to grow CABS as it provides a platform for future growth
Conrad Mwanawashe Business Reporter
OLD Mutual’s banking arm, CABS, is expected to anchor group performance going forward based on the strategy adopted by the group and investment channelled towards the bank’s operations.
CABS’ financial performance in the half year to June 2014 showed significant growth in the deposit base and in interest income, despite marked decline in profitability in the period under review.
In the interim period to June 2014, CABS reported a six percent increase in net interest income to $18,1 million from $17,1 million achieved in the comparative period last year.
The group attributed the dip in profit of 33 percent to $7,2 million from $10,7 million last year, to the costs incurred to support growth as well as investment in the new IT system. Deposits increased by 23 percent to $529,5 million from $430 million.
Presenting Old Mutual Group half year to June results, chief executive Mr Jonas Mushosho said the group took a strategic decision to grow CABS as it provides a platform for future growth.
“We believe that our strategy of investing into the growth of CABS is very important as it is our distribution channel for the group.
“Secondly, we have decided that CABS is going to be our key for entering into the new clusters of economic growth, the informal sector and the SME space.
“Our activity going into the informal sector is going to cover funding, provision of shelter, loans and risk products. We are going to use CABS,” said Mr Mushosho.
“We believe that to transform CABS from just being a provider of mortgage finance to a full provider of financial services, we needed to have a new system. We launched phase 1 of the new system and this year we continued with phase 2 of the system, which we call T24, consolidating what we did last year and adding additional functionality.
“A few weeks ago we re-branded CABS to just refresh the look and feel and we are all very excited about how that re-branding has gone,” said Mr Mushosho.
The new system cost the financial services group $12 million.
“Bancassurance is of great advantage to us because we are now able to sell our products through CABS. Under the bank we continue to grow the deposits.
“We have sourced new lines of credit to enhance our lending capacity. In March we signed an agreement with Proparco and we received the $10 million in the month of June. We have also managed to increase our mortgage term to 20 years from 15 years, (CABS) being the only building society in the country offering 20-year money,” said Mr Mushosho.
He said the group will continue to pursue opportunities in online banking. Textacash continues to make progress.
Growth in performance reflects increase in demand for loans and lending capacity and deposits increase was driven by new clients acquired.
“Increase is attributable to a few large accounts and general borrower stress from tough economic conditions,” said Mr Mushosho.
Old Mutual group recorded premium income growth to $81,9 million from $74,8 million, representing a nine percent increase.
Funds under management went up by six percent to $1,7 billion mainly driven by the increase in net client cash flow.