‘Zimbabwe banks fairly stable’

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ZIMBABWE’S banking sector remains “fairly stable” despite systemic risks inherent in the country’s fragile economy, a new report by MMC Capital has revealed.
The investment research firm said the banking sector’s health was evident by growth in core metric such as total deposits, total loans and advances and total assets.
This was after total banking sector deposits surged by 22 percent to US$10,32 billion by the end of December 31, 2018 from US$8,6 billion recorded in the prior year. At the time, bond notes and United States (US) dollars were rate at par, before the interbank market was introduced in February this year.
“Market skewness, as reflected by the Herfindahl-Hirschman Index (HHI) show that banking sector deposits’ concentration continue to decline with the index value falling from 1 107 in 2017 to 1 052 in 2018,” MMC Capital said.
HHI is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them. It is calculated by squaring the market share of each firm competing in a market and then summing the resulting numbers. It can range from close to zero to 10 000.
MMC Capital indicated that it “maintains the opinion that the trend reflects a prudent banking paradigm and an inclination towards flight to quality. The banking sector asset quality remains a priority and showed signs of improvement in the year”.

In the period under review, the Zimbabwe Asset Management Company continued to acquire non-performing loan (NPLs) assets from banks, with the ratio of NPLs declining to 6,92 percent by end of 2018 from its peak of 10 percent in 2015.
“Despite the predominant operational challenges, the Zimbabwean banking sector is exhibiting resilience. Banks are employing innovative strategies on both the local and global fronts in a bid to diversify revenue streams and add to the bottom line,” MMC Capital said.
One such strategy has been the targeting of Zimbabweans in the diaspora with banking and investment products.
In the year 2018, high credit risk, liquidity leakages and the growing informalisation of the economy have been the major highlights.
Notwithstanding these negatives, MMC capital said banks have responded with initiatives towards enhancing financial inclusion and leveraging on technology to broaden their reach into the unbanked segments of the population.
They have also embarked on transformational partnerships and synergies that will contribute to their bottom line.
The banking sector remains critical to the recovery and growth of the Zimbabwean economy.
Bank’s total assets for the period under review grew by 24 percent, while loan-to deposit ratios weakened to 39,62 percent in 2018 from 64 percent in 2017.
This shows reduced lending appetite by banks as they focus on minimising exposure to credit risk.
“CBZ Bank continues to be a sector leader as evidenced by its larger market share across all deposits, total assets and profitability categories as at year end. CABS was also a leading player in the sector, emerging ahead in terms of loans and advances extended.