Banks record $242m profit

HARARE - Zimbabwe’S financial institutions have recorded a 34 percent surge in profits during 2017 to $242 million from $181 million in 2016, despite tight liquidity and deteriorating economic conditions.

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said 18 out of the 19 operational financial institutions had posted profits in 2017, with the sector’s aggregate core capital increasing 10,48 percent — from $1,24 billion as at June 30, 2017 to $1,37 billion at the close of 2017 — on the back of improved earnings performance

“The net profit for the period ended December 31, 2017 amounted to $241,94 million, representing an increase of 33,91 percent, from $181,06 million reported in the corresponding period in 2016,” the central banker said in his 2018 monetary policy statement.

The superb performance by the banks comes at a time when the country is experiencing acute cash shortages which have triggered withdrawal limits, consequently leading to numerous withdrawals by depositors and more income for banks.

Mangudya said the sector’s average prudential liquidity ratio of 62,62 percent as at December 31, 2017, was above the regulatory requirement of 30 percent with all banks compliant with the minimum prudential liquidity ratio as at December 31, 2017.

Despite the high average prudential liquidity ratios recorded across the sector, underlying foreign currency shortages in the economy have also affected the banking industry.

“Various measures, including the increased usage of digital platforms, are envisaged to ease the demand for physical cash,” the governor said.

The apex banker also announced RBZ will start conducting comprehensive financial stability stress tests on the banking sector in September to assess impact and resilience of their portfolios and ultimately capital and liquidity.

“As part of measures to promote financial sector stability, the Reserve Bank in collaboration with the World Bank and other financial sector regulators, shall assess the effectiveness of existing frameworks to respond to crisis situations in line with international best practices, during the first quarter of 2018,” said Mangudya.

The ratio of non-performing loans (NPLs) was 7,8 percent as at December 31, 2017, down from 7,87 percent prior comparable period as banks continue to strengthen their credit risk management systems, in the aftermath of balance sheet clean up through disposals of NPLs to the Zimbabwe Asset Management Company.

Banking sector deposits —  including inter-bank deposits — increased 26,47 percent from $6,99 billion as at June 30, 2017 to $8,48 billion as at December 31, 2017.

“The notable increase in deposits was partly attributable to increased export receipts, expansionary impact of government expenditure and multiplier effect of new deposits,” Mangudya said.

Banking sector loans and advances increased from $3,69 billion as at June 30, 2017 to $3,80 billion as at December 31, 2017 as lending to the productive sectors constituted 73,64 percent of total sector loans at the close of 2017.

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