Nedbank picks up $70 million RBZ bonds

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RECENTLY-REBRANDED Nedbank Zimbabwe (Nedbank) has over the first six months of this year taken up $70 million of the Reserve Bank of Zimbabwe’s (RBZ) savings bonds, the financial institution’s managing director Charity Jinya has said.
The bonds, which were introduced by the central bank in September 2017 to mop up excess liquidity on the real time gross settlement platform, have reportedly raised over $1 billion.
“Total assets increased by 6,1 percent to $391,51 million from $369,07 million as at 31 December 2017 mainly due to an increase in net loans and advances to customers which grew by 14,6 percent and investment in RBZ Savings Bonds of $70 million,” Jinya said in a statement accompanying the bank’s financial statements for the six months ended June 2018.
This comes as a sub-optimal monetary environment, characterised by surplus liquidity, inflation and foreign currency shortages, has forced most banks to abandon conventional asset distribution, dominated by loans and advances, settling for other asset classes such as government securities, equities and properties in search of value preservation and meaningful investment returns.
Nedbank’s loans to deposit ratio dropped to 36,62 percent as at June 2018, from 42,63 percent in 2017, while the bank built up an investment securities portfolio of $150 million over the first half of 2018, from scratch.
The bank’s investment securities portfolio is constituted of Afreximbank Trade Backed Securities of $64 million, Treasury Bills (TBs) of about $15 million and $70,8 million in RBZ savings bonds.
The bank has interestingly favoured RBZ Bonds over TBs, which are infamous for inflation peddling increases of money supply.
Analysts have also warned that TBs in the market are exposing the banking sector to significant systemic settlement risk given the likely default by government on maturity of the securities.
RBZ bonds on the other hand, are meant to neutralise the surplus liquidity effects of TBs.
Analysts have however suggested that the effectiveness of the RBZ Bonds in mopping up liquidity will be limited. A survey by Investments Professionals Association of Zimbabwe (IPAZ), an association of chartered financial analysts, showed most analysts to be of a doubtful view.
“On the effectiveness of the RBZ bonds in mopping liquidity on real time gross settlement (RTGS), 66, 67 percent said there is no short to medium term impact on liquidity because the liquidity problem is systemic and the RBZ cannot address liquidity but can only manipulate its extent,” said IPAZ.
Nedbank’s non-performing loans ratio for the period under review was 6,51 percent down from 7,69 percent reported in December 2017.
“This demonstrates our continued focus on improving the credit quality of our lending book,” Jinya said.
The bank’s total deposits from its customers increased by 3,27 percent to $307,16 million, up from $297,44 million as at 31 December 2017.