Banks’ net profit jumps to $176m

ZIMBABWE’S banking sector recorded a net profit of $176,1 million for the six months to June 30, 2018, a 75,1 percent increase from $100,6 million recorded in the previous comparable period on the back of improved interest earnings and deposits.
The sector, which consists of 13 commercial banks, five building societies and one savings bank, saw total deposits growing to $9,5 billion from $6,9 billion during the period under review.
“The banking sector was predominantly funded by demand deposits, which accounted for 64,47 percent of total deposits as at 30 June 2018,” said John Mangudya, the Reserve Bank of Zimbabwe governor.
Time deposits account for 24,3 percent, call deposits 1,3 percent, savings deposits 4,8 percent, foreign deposits (foreign entity deposits) 1,6 percent and foreign deposits (foreign lines of credit) 2,2 percent.
“Condition and performance of the banking sector was considered satisfactory for the period ended 30 June 2018, as reflected by adequate capitalisation, improved earnings performance and asset quality,” Mangudya said.
As at June 30, 2018, Mangudya said the sector remained adequately capitalised and capital held by banking institutions was considered sufficient against risks.
“All banking institutions were in compliance with the prescribed minimum capital requirements (as at June 30 2018),” he said.
Mangudya said banking institutions were making significant progress towards meeting the 2020 minimum capital requirements. In terms of the capitalisation plans submitted by banking institutions, all locally owned commercial banking institutions have indicated plans to operate as tier 1 banking institutions together with foreign-owned banking institutions which are required to maintain minimum capital of $100 million.
By the end of six months, three banking institutions — CBZ Holdings, Stanbic and the Central Africa Building Society — were already compliant with the 2020 minimum capital requirements.
The quality of the banking sector loan portfolio continued to improve during the period under review as reflected by the ratio of non-performing loans to total loans of 6,22 percent as at June 30 2018, from 7,95 percent. Productive sector lending constituted 66,9 percent of total loans.
“As the economy rebounds, banking institutions are urged to ensure that lending rates are supportive of economic recovery to enhance productive sector lending,” Mangudya said.
The average prudential liquidity ratio for the banking sector was 68,45 percent as at June 30 2018 against the minimum regulatory requirement of 30 percent, largely as a result of the cautious lending approach adopted by most banks against the background of shortages of foreign currency exchange.
The improvement in asset quality was largely attributed to the combined impact of continued enhancement in the banks’ credit risk management systems, use of the credit registry, as well as disposals of Non-Performing Loans (NPL) to the Zimbabwe Asset Management Corporation Limited.
“The sustained reduction in NPLs is expected to continue strengthening banks’ balance sheets thus enhancing the banking sector’s safety and soundness,” said Mangudya. newsdesk@finga