THE Securities and Exchange Commission of Zimbabwe (SecZim) has rated earnings for the asset management sector for the quarter ended September 30 2023 as ‘critical’ after total operating profit for the industry decreased by 2 545%.
The industry faced a number of challenges during the quarter, which included high inflation, market volatility, central bank rates hike, market volatility and interest rate movements, and exchange rate instability.
According to the latest SecZim report, 14 out of 23 asset managers reported operating profits while nine entities recorded losses.
The sector’s capital was, however, rated fair.
“The asset management sector earnings were rated critical for the period under review.
“The industry total and average operating profit for the quarter amounted to $3,30 billion and $143,4 million respectively,” the report reads in part.
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“Total operating profit for the industry decreased by 2 545% from $87,3 billion recorded in the second quarter of 2023.”
Explaining the situation to Standardbusiness, SecZim chief executive officer Anymore Taruvinga said each quarter, the securities market intermediaries submit their returns to the organisation, which are evaluated to determine appropriate ratings.
“The evaluation revealed that the asset managers’ earnings dropped dramatically in the third quarter,” Taruvinga said.
“The average profit for the quarter was the lowest since the first quarter of 2022.
“It simply means that industry profitability is falling and that some asset managers are making losses.”
Old Mutual Investment Group led the investment management firms with the highest market share of 53,09% for the period under review, followed by CBZ and First Mutual Wealth with market shares of 7,22% and 6,72% respectively.
The report also shows that custodial services business, which is primarily carried out by registered banks namely, CABS, CBZ, FBC, Standard Chartered, Stanbic, and ZB, held assets on behalf of clients worth $11,68 trillion, representing a 7,04% quarter-on-quarter increase from the previous quarter.
Local clients accounted for 81,85% of assets under custody (AUC) while foreign clients accounted for the remaining 18,15%.
Comparatively, local clients accounted for 89,18% in the second quarter of 2023, while foreign clients accounted for 10,82% of total AUC.
The report says as at September 30 2023, the total value of securities administered by the transfer secretaries amounted to $7,05 trillion and US$409,82 million.
First Transfer Secretaries with 69,80% commands the highest market share in the industry followed by ZB Transfer Secretaries with 16,02% and Corpserve Registrars with 14,18%.
The sector’s earnings were rated strong.
The sector reported average revenue of $3,02 billion against average operating expenditure of $1,19 billion.
The total industry profit for the period was $5,49 billion averaging $1,83 billion with all the firms reporting positive earnings.
The sector’s capital rating was rated satisfactory, with all three Transfer Secretaries adequately capitalised.
The unclaimed shares portfolio valuation stood at $13,63 billion and US$667 568.
In 2024, the Investor Protection Fund (IPF) in collaboration with SecZim intends to focus on the work of a committee made up of independent stockbrokers and stockbroking firms.
The committee had commenced the process of allocation and interrogation of unclaimed portfolios to arrive at a know-your-customer position, which promotes the identification of and claims by the owners of shares in this portfolio.
“Publicity will be key and the IPF proposes to fund a nation-wide all-media campaign to raise awareness and activate claims,” it said.
The IPF shed 6,57% to $20,48 billion from $21,92 billion recorded in the prior quarter. As at September 30 2023, listed equities’ market value decreased by 10% to $11,82 billion from $15 billion recorded in the prior quarter.