Zimnbabwe banks face new rise in bad loans

Non-performing loans (NPLs) could rise in the current financial year after financial institutions struggled with bad loan books in the full year to December (FY15), an analysis of banks' financial results shows.

Several banks impaired loans in FY15, signifying potential problems for indigenous banks as disposable incomes diminish and the economy falters.

Bad debts at their peak had risen above US$700 million, showing increased credit risk in the financial sector. While the majority of banks posted profits in FY15 reporting period, a look at indigenous banks financial results shows that NPLs could rise further, creating a new headache for the central bank.

Although the Reserve Bank of Zimbabwe (RBZ) created a special purpose vehicle, the Zimbabwe Asset Management Company (Zamco), to absorb banks' bad loans two years ago, judging by the latest financial reports the problem is far from over.

The new structure has so far absorbed US$357 million in bad loans.