CBZ, CABS meet RBZ capital requirements

HARARE - CBZ Holdings and CABS have already met the $100 million minimum capital requirements set by the Reserve Bank of Zimbabwe (RBZ) six years ahead of the deadline.

The central bank, which early this year extended the minimum capital requirements from June this year to June 2020 due to a biting liquidity crunch in the country, expects commercial banks and building societies to be capitalised at $100 million and $80 million respectively.

A recent report from the apex bank, however, shows that by June 2014, CBZ Bank had a capitalisation of $153,74 million while CABS had $88,08 million.

The quarterly industry report noted that notwithstanding the challenging operating environment, the banking sector remained generally stable.

“The banking sector remains well capitalised with 14 out of the 20 operating institutions compliant with the minimum capital requirements as at June 30, 2014. The remaining non-compliant banks have embarked on capital raising initiatives to strengthen their capital positions.

“Despite the decline in the overall net income of the banking sector for the half year ended June 30, 2014, 13 out of 20 operating institutions recorded profits,” read part of the report.

The RBZ said credit risk remains a significant challenge facing the banking sector as reflected by rising non-performing loans.

“A few banking institutions continued to face liquidity challenges. Capital Banking Corporation’s licence was cancelled with effect from 4 June, 2014, following the bank’s voluntary surrender of its licence and request for cancellation in terms of section 14(4) of the Banking Act on February 7, 2014,” said the central bank.

By end of June this year, banking sector deposits amounted to $4,96 billion, while loans and advances were $3,81billion, translating into loans to deposits ratio of 76,82 percent. However, banks’ lending portfolio continues to be skewed towards consumptive lending.  

Despite the continued economic meltdown in the southern African country, the RBZ noted that the banking sector remained profitable with an aggregate net profit of $26,53 million for the half year ended June 2014, up from $4,90 million during the corresponding period ended June 2013.

“A total of 13 banks out of the 20 operating banking institutions (including a savings bank) recorded profits for the half year ended June 30, 2014. The losses recorded by the few banking institutions in the current period are attributed to high levels of non- performing loans, lack of critical mass in terms of revenue to cover high operating expenses and deliberate strategy by some banks to clean up bad loan books through provisioning,” said the Apex bank.

While most banks in the country are performing above market expectations, the central bank expressed reservations over Metbank, Allied Bank, AfrAsia and Tetrad which are facing liquidity and solvency challenges due to macro and institution specific factors.

“Cognisant of the need to protect the interest of depositors and promote banking sector confidence, the Reserve Bank has been engaging these institutions to come up with credible plans to turnaround their waning financial condition,” said John Mangudya, the RBZ governor in his monetary policy statement.

“In this regard, shareholders and boards of the distressed banks have been directed to finalise implementation of their turn around plans, failure of which the Reserve Bank will be left with no option but to intervene and institute appropriate supervisory action in terms of the Banking Act,” he added.

 

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While it is comentatble that this banks have reached this capital thresholds, the straight jacket aproach will not tell us the quality of the assets the capital is up against. I hope we get disclosure as to that end.

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