Banks' profits in massive surge

HARARE - Zimbabwean banks recorded a combined profit of $52, 8 million in the year to December 2014, up 1 453 percent from $3, 4 million recorded in prior comparable period, central bank statistics revealed.

John Mangudya, the Reserve Bank of Zimbabwe governor, said despite a few banks struggling to stay afloat, a total 14 out of the 19 operating banking institutions recorded profits during the period under review.

The massive surge in the banks’ profits come as some market analysts say the financial institutions are charging depositors high interest rates and steep bank fees.

In his 2015 monetary policy, Mangudya said some banks recorded losses due to “high levels of non-performing loans, liquidity constraints and incapacity to generate sufficient revenue to cover the high operating expenses”.

He said banks had to institute revenue-enhancing strategies coupled with cost containment measures to bolster their earnings capacity and maximise profits.

In 2014, banking sector deposits — including interbank deposits — grew by four percent to $5,1 billion while loans and advances stood at $4 billion, translating to a loan to deposits ratio of 78,9 percent.

However, Mangudya noted that deposits have remained largely short-term in nature hindering meaningful financial intermediation.

“The situation is exacerbated by limited inter-bank trading, general market illiquidity and limited lender of last resort function of the Reserve Bank,” he said.

In an effort to promote financial inclusion and cultivate a saving culture, the RBZ boss urged banks to lower charges.

“The Reserve Bank has observed that in a number of jurisdictions such as South Africa, India and Canada, conscientious efforts and collaborative arrangements between monetary authorities and banking institutions have allowed for the operation of low cost accounts to make banking more accessible to the public and, specifically, to increase banking reach to all communities,” he said.

He said some South African institutions offered low income transacting accounts.

“In order to widen such initiatives and promote financial inclusion, the Reserve Bank and the Bankers Association of Zimbabwe (Baz) have resolved that banks, without low cost accounts, should at least provide the banking public with basic banking services at low or no cost,” he said.

This comes as most Zimbabweans do not have bank accounts due to lack of confidence in the financial services sector as well as low disposable incomes.

The proliferation of mobile money transfer services has also dealt the banks a major loss of business.

Also, the recent collapse of several banks has further dampened depositors’ confidence.

Comments (1)

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Observer - 21 February 2015

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