Banking sector profits jump 61%

ZIMBABWE's banking sector has recorded a 61 percent jump in aggregate profits to $390 million for the year ended 31 December 2018 when compared to $242 million in 2017, according to the Reserve Bank of Zimbabwe (RBZ).

In his 2019 Monetary Policy Statement presented on Wednesday, RBZ Governor, Dr John Mangudya, said all banking institutions generally continue to maintain a stable performance, as reflected by adequate capitalisation and improved earnings performance.

The country has a total of 19 banking institutions, 13 commercial, five building societies and one savings bank. Although asset quality for the sector deteriorated as reflected by an increase in the average non-performing loans (NPLs) to total loans ratio during the period under review, Dr Mangudya said key indicators show the sector remains financially sound. For instance, he said, the combined asset base grew from $11.2 billion to $13.9 billion with total deposits clocking $10.3 billion from $8,4 billion in 2017.

Total loans and advances also grew from $3.8 billion to $4.2 billion as net capital base also rose to $1.83 billion from $1.58 billion. The Central Bank chief also said the banking sector remains adequately capitalised.

"The banking sector aggregate core capital increased by 15.32 percent, from $1.37 billion as at 31 December 2017 to $1.58 billion as at 31 December 2018, largely due to organic capital growth. All banking institutions were compliant with the prescribed minimum capital requirements as shown in the table below," he said.

"The challenging macro-economic environment underscores the need for banking institutions to implement capital preservation strategies."

The RBZ Governor said total Nostro FCA deposits amounted to $673.81 million, representing 6.53 percent of total deposits. He explained that depositors under this category predominantly constituted corporate deposits amounting to $654.77 million, representing 97.17 percent of total Nostro FCA deposits.

Treasury announced the separation of Nostro FCAs and RTGS FCAs deposits in October 2018. As at 31 December 2018, the number of corporate RTGS FCA depositors was 214,094 valued at $8.67 billion, while the number of individual RTGS FCA depositors, amounted to 3.24 million valued at $894.54 million.

Of the 3.24 million individual depositors, (95.98 percent) held deposit balances of less than $1 000 each, with an average balance of $80, accounting for a total $213.42 million. On the other hand, Dr Mangudya said, corporate RTGS FCA depositors (1,884) holding balances in excess of $500 000 constituted 83.64 percent ($7.25 billion) of total corporate RTGS deposit of $8.67 billion.

"Going forward, it is envisaged that the number of Nostro FCA depositors will increase, driven by increases in the tobacco and mineral production, as well as financial inclusion efforts," he said.

Meanwhile, the RBZ Governor said lending to the productive sector increased over the year 2018, from 73.64 percent to 76.01 percent of total loans. He attributed the increase to lending to the agricultural sector, which increased from 14.7 percent to 16.39 percent and other segments including state owned enterprises.

Dr Mangudya, however, expressed concern over a growing credit risk in the banking sector, as reflected by the ratio NPLs to total loans of 8.25 percent from 7.08 percent in 2017.

"The increase in NPLs is largely a reflection of forward looking credit risk management tools adopted by banks in line with the IFRS 9 accounting standards, resulting in improvement of the banks' risks controls and provisions coverage," he said.