Paul Nyakazeya, Group Digital Editor 
BANKS’ net profit during the half year to June 30 increased to $15,1 billion, a 12,1 percent increase from $13,5 billion recorded in prior year due to an increase in transaction volumes.
In their third quarter investment market review for the period under review, Akribos Research Services said the banks’ profitability during the period under review was driven by non-funded income such as revaluations gains, fees and commissions.
“Bank incomes were predominantly comprised of non-funded income as the volumes of transactions that flow through the sector increased. Profitability as measured by net profit went up by 12,11 percent from $13,46 billion in HY’20 to $15,09 billion,” said Akribos.
“Banks’ profitability in the period under review was driven by non-funded income such as, revaluations gains, fees, and commissions. This trend is likely to continue as banks continue to enhance their digital channels to lower operating costs, improve customer experience and deepen financial inclusion,” the research firm said.
Akribos said the industry had witnessed a significant transformation in terms of how customers consume their services. Technology is gaining traction and the Covid-19 restrictions proved to be a potent catalyst for this process especially in economies where migration to digital banking was slow.
During the period under review, the slight increase in the loan to deposit ratio of 8,13 percent signalled that the sector is developing some appetite to lend albeit at a relatively small scale compared to the demand for capital in the economy.
“The sector is still awash with liquidity as the appetite to lend is almost non-existent hence the introduction of on-negotiable certificate of deposit in June 2021 by the Central Bank.
“The instrument was intended to force the sector to lend its excess ZWL$ at a certain interest rather than to surrender it to RBZ at no cost,” said Akribos.
“Banks have continued to lend with caution as indicated by the non-performing loans ratio that declined by 0,45 percent year on year. The combination of lack of willingness to lend by the sector and high lending rates is likely to result in limited asset creation by the sector to the detriment of economic growth,” they said.
The research firm said funding remains the biggest risk for the economy, and the mounting national debt burden for Zimbabwe had not helped the situation.
“By close of December 2020, external debt had accumulated to US$10,5 billion (71,2 percent of GDP). In March 2021, Treasury started making quarterly payments to owed international financiers in a bid to show commitment in clearing the outstanding debts. The government has resorted to domestic borrowing as an alternative source of financing the 2021 fiscal budget deficit ($30,8 billion).”
“Since the beginning of the year, the government has been floating treasury bills and bonds using the drip system. As at April, 30 2021, total domestic debt amounted to $20,9 billion a situation that, in our view, has led to the crowding out of resources for the more efficient private sector by the public sector,” said Akribos said.
The research firm said Zimbabwe’s malaise has been limited capital expenditure for the purposes of creating increased capacity for growth.
The decades of under investment in the local economy by both the government and the private sector has left the capital infrastructure deficit at an unsustainable level. This has reflected in the anaemic Gross Domestic growth rates that the economy has achieved in the last two decades.
