Liquidity, credit risk to persist — RBZ

HARARE - The Reserve Bank of Zimbabwe (RBZ) expects liquidity and credit risk to remain the main huddles confronting local financial institutions, amid indications that banks will achieve improved performances in the period to December 2016.

In its latest report on the sector, the central bank said while the banking sector was anticipated to post impressive results for the last half of 2016, cash challenges were expected to remain.

“Liquidity risk and credit risk will remain the significant risks confronting the banking sector in the next quarter.

“However, overall, the banking sector is expected to achieve improved performance for the year ended December 31, 2016 on the back of strategic realignment and cost rationalisation, as well as adoption of innovative and cost effective distribution channels,” the apex bank said.

Zimbabwe has sunk into a cash crisis because of lower productive capacity and low exports. Its net importer status has also worsened the situation, with authorities saying the country has become a cheap source of hard currency.

The current dollar crunch has affected businesses, with companies unable to pay for crucial imports such as raw materials and equipment for production.

This in turn has affected borrowing and impacted on the ability of banks to lend.

RBZ also pointed out that the banking sector was going to continue partnering retail entities as agents in offering basic banking services.

The banking sector remained profitable during the period ended September 30 2016, with an aggregate net profit of $111,30 million, representing an increase of 29,28 percent from the $86,09 million reported for the same period in 2015.

Out of 19 banking institutions, 17 recorded profits during the period ended September 30, 2016, with the average return on assets and return on equity improving to 1,56 percent and 8,85 percent as at  September 30, 2016, from 1,37 percent and 7,91 percent recorded for the period ended September 30, 2015, respectively.

In the period to September 2016, interest income was the major driver of total income of $730 million, constituting 59,41 percent while non-interest income accounted for 40,59 percent of total income, comprising fees and commission at 34,8 percent, foreign exchange fees of 3,94 percent and other non-interest income which stood at 1,77 percent.

“Fees and commission increased by 4,78 percent from $250,51 million to $262,48 million, over the review period.

“The increase was partly attributed to increased volumes of cash withdrawal transactions associated with lower cash withdrawal limits imposed by some banks,” RBZ said.

However, market watchers say this will change this year on the back of an RBZ-imposed withdrawal fee slash, with newly introduced withdrawal charges are anticipated to eat into income.

Prior to Zimbabwe’s cash shortages a few months ago, the banks were charging $2,50 for ATM withdrawals and about three percent  (of the withdrawn amount) for cash withdrawals from inside banking halls.

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