The National Savings and Credit Bank –NATSAVE- recorded a negative variance of K231,644,774 for the financial years ended 31st December 2020, 2021, and 2022.
According to the Auditor General’s Report, the Bank recorded losses of K213, 131,000 in 2020, K81,679,122 in 2021, and K91, 263,164 in 2022. It was further observed that according to the NATSAVE strategic plan and budgets for the period under review, the bank had Return on Equity targets of 15%, 10%, and 19% for 2020, 2021, and 2022 respectively, but recorded negative Return on Equity of 421% in 2020, 298% in 2021 and 85% in 2022 indicating poor profitability of the Bank. “Return on Equity Return on equity (ROE) expresses profit after taxation (PAT) as a percentage of equity. It measures how much profit an entity generates for the benefit of its shareholders’’.
The Auditor General’s report further indicated that according to the NATSAVE strategic plan for the period under review the bank had Net Interest Margin targets of 25%, 13%, and 56% for 2020, 2021, and 2022 respectively. Although the Bank recorded positive net interest margins of 16% and 25% in 2021 and 2022 respectively, the margin recorded in 2022 was below the set target of 56%. “Net interest margin is a measurement comparing the net income a financial entity generates from its credit products such as loans and mortgages. It is calculated by comparing the net interest income against average earning assets”.
The bank further had a Gross Margin ratio target of 32%, 71%, and 63% for 2020, 2021 and 2022 respectively. It was however noted that the bank recorded a gross margin ratio of 33% above the set target of 32% in 2020, but unfortunately recorded Gross Margin ratios of 53% in 2021 and 58% in 2022 which were below the set targets.
With regards to Return on Assets, the bank had Return on Assets targets of -12%, 1%, and 0.3% for 2020, 2021, and 2022 respectively. “A review of the financial statements for the period under review revealed that the Return on Assets was negative in all the three years”. It was noted that the bank recorded a negative Return on Assets of 11 in 2020, 4 in 2021, and 4 in 2022. This was attributed to the losses the bank recorded in all three (3) years under review.
During the period under review, the regulatory capital of NATSAVE was negative K146,637,146 representing a deficiency of K239,085,961 below the required minimum regulatory Capital of K92,448,815 being 10% of risk–weighted assets of (K925.7 million).
The bank further recorded Regulatory Capital Adequacy ratios of 2% in 2020, negative 9% in 2021, and negative 16% in 2022 which were below the minimum 10% prescribed by Bank of Zambia. “The Capital adequacy Ratio indicates whether the Bank is stable in its meeting time liabilities and other risks such as credit, liquidity, and operations. Furthermore, it implies that depositors’ funds are protected and the bank is not at risk of insolvency”. The recommended rate by the Bank of Zambia is above 10%.
Furthermore, the Bank had equity of K50,625,514 in 2020 which was reduced to negative K27,381,782 and K107,557,184 in 2021 and 2022 respectively.
The report further indicated that a review of the suspense unclaimed fund schedule revealed that amounts totalling K1,060,040 which remained unclaimed as far back as 2009 had not been relinquished to the Bank of Zambia contrary to the Provision. It was noted in the report that “Section 160 (3) of the Banking and Financial Services Act No. 7 of 2017 stipulates that a financial service provider holding funds or personal property presumed abandoned under this section should report to Bank of Zambia on the amount and nature of such funds or property, in such form and at such time as may be prescribed by the Bank, and shall pay such funds or relinquish the property to the Bank upon expiration of a period of ten (10) years”.
In addition, a review of the 4th May 2021 Executive Committee minutes showed that NATSAVE engaged One World to pilot the bank-wide courier services including the distribution of 3000 Europay MasterCard and Visa cards. The report revealed that as of 31st December 2022, amounts totaling K374,194 had been paid to the service provider. It was however observed that none of the procurement procedures provided for under Section 37 of the Zambia Procurement Act No. 8 of 2020 were followed.
